2019 - ISSUE ONE

06 Sink or Swim? Sri Lanka in the

Fourth Industrial Revolution

Digitising the Economic

14 Space: Enter, Entrepreneurs of
Sri Lanka!

Counting the Cost:

24 Terrorism and its Impact on
the Sri Lankan Economy
The Great British Breakoff:
32 Making Sense of the Brexit Debacle
Shaping South Asia’s
Future in the Fourth
Industrial Revolution
Special Edition for the
12th South Asia Economic Summit (SAES XII)
CONTENTS
06 22 40
Managing Sri Lanka – China Allowing Youth to Tuk-Tuk or not Tuk-
Sink or Swim? Sri Lanka in the
Economic Relations: BRI, Debt, and Tuk: Should Access to Three Wheeler
Fourth Industrial Revolution
Diplomacy Market in Sri Lanka be Regulated?

08 42
24 Lowering Sri Lanka’s NEETs: Need for
My Way or the Huawei: Global Battle Counting the Cost:Terrorism and Smoother School-to-Work Transitions
for 5G Dominance and its Impact on its Impact onthe Sri Lankan Economy
Sri Lanka 44
26 Lurking in the Shadows:
10 Tourism vs. Remittances: Impact of A Closer Look at Multidimensional
Succeeding in the 4IR Era: Easter Attacks on Sri Lanka’s Foreign Poverty in Sri Lanka
Opportunities and Challenges for Exchange Earnings
Sri Lanka 46
Alleviating Poverty in Sri Lanka:
12 28 Take a Broader Look at Poverty
Measures!
Technology and Economic The Evil Nexus Between Migration
Transformation: Is Sri Lanka Prepared and Terrorism: Implications for Border 48
to Ride the 4IR Wave? Control in Sri Lanka Women in Times of Disaster:
Gender Dimension of Disaster
14 30 Management in Sri Lanka

Digitising the Economic Space: Enter, Tipping the Balance: Are Worker 50
Entrepreneurs of Sri Lanka! Remittances to Sri Lanka Really as Trash Talk: Dealing with Marine
Large as We Think? Plastic Pollution in Sri Lanka’s
Oceans
16
32 52
Policies Pave the Way for Sri Lanka’s Linking Disaster Risk Management
Economic Transformation Through The Great British Breakoff: Making
into Economic Policy Planning in
Technology Sense of the Brexit Debacle
Sri Lanka

34 54
18 Inside IPS
Where have all the Typists Gone? Who, When, Where? Improved Data
Technology and Changing Job and Information for Tourism
56
Profiles in Sri Lanka IPS News
Development in Sri Lanka
57
36 Latest Publications
20 Quality Standards, Make or Break
Point of Sri Lanka’s Cinnamon
58
Greater Social Protection for Sri Contributors
Lankan Women through Better Jobs: Industry
Role of Technology and Innovation
60
38 In a Nutshell
Improving Quality of Jobs in Sri 61
Copyright and Disclaimer Lanka: Can Exports be the Panacea? Fast Facts
All material published in the Talking Economics Digest are copyright of the Institute of Policy Studies of Sri Lanka (IPS), unless otherwise specified. It cannot be quoted without due
acknowledgement to the IPS and the author. It cannot be reproduced in whole or in part, without the written permission of the IPS. The content, comments and posts of the Talking
Economic Digest and the IPS blog represent the views of individual authors and do not necessarily represent the views of the IPS.

2
EDITORIAL
As the fastest growing region in the
world, South Asia is presented with
both opportunities and pitfalls in the
technology-led, Fourth Industrial
Revolution (4IR). While the region
remains vulnerable to rising inequities,
technological innovations driving the
4IR do hold the potential to accelerate
progress in meeting the Sustainable
Development Goals (SDGs), particularly in
areas such as education, health and food
security. Unsurprisingly, the disruption
of technology through 4IR presents a
watershed moment for the region. 4IR
is not only driving the Fourth Wave of
Globalisation, but it is also introducing
new tools to assess and understand
competitiveness.
Sri Lanka is no exception to this
phenomenon. As Kithmina Hewage points
out in his article, since the importance of
4IR and Sri Lanka’s preparedness for it
has gained growing prominence in policy
discourse, the country “needs to focus on
both technological preparedness as well
as creating a complementary economic
ecosystem. To do so, policymakers and
private sector stakeholders alike should
be cognizant of three critical pillars of 4IR
readiness: digital readiness, human capital
readiness, and economic agility” (p 6-7).
In this context, it is fitting that the theme
of this edition of the Talking Economics
Digest centers on the theme of ‘Shaping
South Asia’s Future in the Fourth
Industrial Revolution (4IR).’ It is also the
focus of the 12th South Asia Economic
Summit (SAES XII), organised by the
IPS, in Colombo, on 26 – 27 September
2019. Meant to compliment the Summit
as a special edition, the Digest contains
articles exploring a broad set of issues
facing South Asia in the 4IR, ranging from
economic growth, labour and migration,
trade and competitiveness, and security
concerns.
For the region as a whole and for Sri
Lanka, the benefits and challenges of
4IR are significant. On the one hand,
the 4IR may allow countries to leapfrog
development stages. Those with better
established manufacturing bases or with
resources to invest in technologies stand
to benefit. At the same time, technological-
driven productivity that drives down costs
of production in advanced economies can
hasten ‘premature’ de-industrialisation
in others. For many, the threat of human
labour displacement by automation is very
real.
For instance, Janaka Wijayasiri points
out that emerging new technologies will
impact trade by reducing the transport
and logistic costs involved. To leverage
Previous Issues
the benefits, however, governments
need to manage the structural changes
brought on by technological advancements
successfully.
2018 - ISSUE ONE
08 Straight Talk on Sri Lanka –
Singapore FTA: What it Means for
Trade and Investment Flows
18 Building a More English-
The Digest also brings to light several
LiterateSri Lanka: The Need to
Combat Inequities
Regulating Inbound Migration:
Creating a
24
‘In’s and ‘Out’s of Sri Lanka’s Policy
challenges in the developing human
Framework
30 Malnutrition in Sri Lanka:
A Persistent Problem Knowledge-based
capital. As Bilesha Weeraratne points out, Economy
shifts in labour migration patterns can be
observed thanks to the transformations
taking place in the world of work in the
4IR era. This means that migrant workers
from Sri Lanka should either carve a niche
in jobs that involve ‘human-only’ tasks
or develop higher tech-skills to become
digital-collar workers. Further, Nisha
Arunatilake and Chathurga Karunanayake 2018 - ISSUE TWO
note that at the rate technology is 04 Sri Lanka’s Depreciating
changing job profiles, some jobs that
Rupee: Avoiding a Money-Go-
Round
Chickens, Turkeys, and
08 Tariffs – A First Attempt at
will be present in the future have not Measuring Border Tax Evasion in
Sri Lanka
16 Sending Sri Lankans and
even come into existence as yet. Thus,
Receiving Chinese
Workers: Emerging Trend of
Labour Migration in Sri Lanka
32 Digging Deep: A Closer Look
“the traditional methods of planning, at Income Poverty in Sri Lanka
reforming education, and training will not
be able keep up with changes that are
Transitioning
taking place in the labour market. The to a High Middle
organisation and the governance of the Income Economy
education system will need to be modified
in the long run, so it is able to adjust to
changing times” (p 18-19).
Executive Director
Meanwhile, Sri Lanka and the rest of Dushni Weerakoon
the South Asian region cannot afford to
ignore the security concerns brought
on by the 4IR. In this era, ensuring data Director of Research
privacy and cyber security becomes Nisha Arunatilake
more important than ever before and
regulatory frameworks need to be updated
accordingly, as the world embraces an Talking Economics Team
internet-based socio-economic landscape. Janaka Wijayasiri
Bilesha Weeraratne
The challenge, therefore, is not merely Kithmina Hewage
limited to technological adoption, but
Shihara Maduwage
rather a broader task to reform the laws,
institutions, and economic structures that Charmaine Wijesinghe
can adequately respond to a world that
does not recognise national borders. When IPS Photo Credit
striving to achieve growth, equity, stability,
and development on economic, social, and Roshan Kaluarachchi
environmental fronts, while keeping up Nalaka Liyanapathirana
with the rapidly-evolving technologies of
the modern world, these are some of the Institute of
issues that need attention. Policy Studies of Sri Lanka
To this end, I hope the Talking Economics 100/20, Independence Avenue
Digest serves as an informative, engaging, Colombo 07, Sri Lanka
and thought-provoking piece of work. As Tel: +94 11 2143100, +94 11 2665068
always, I welcome feedback and wish you URL: www.ips.lk
a pleasant read. Blog: ‘Talking Economics’
Web: www.ips.lk/talkingeconomics
Shihara Maduwage
Editor – Talking Economics Twitter: www.twitter.com/TalkEconomicsSL
shihara@ips.lk
September 2019 Designer
Suresh W Fernando
3
About IPS
The Institute of Policy Studies of Sri Lanka (IPS) is an autonomous
economic research organisation, established by an Act of Parliament.
Since its formal establishment in 1990, the IPS has come to be
recognised as a centre of excellence in economic policy research. An
important feature of our research is its coverage of many of the major
areas of relevance to current socio-economic policy issues in Sri Lanka
and the Asian region. The complementary expertise of our researchers
is the key source of strong empirically-based evidence to support
economic policymaking, disseminated widely through reports, research
papers, journal articles and public presentations.
Our Mission
Conducting high-quality, independent, policy relevant research that
provides trusted insights on socio-economic issues to inform our stake-
holders and shape policy agendas to positively impact the lives of all Sri
Lankans.
Our Research Focus
The substantiate focus of our research is to provide an integrated
analysis of the medium to longer term development challenges facing Sri
Lanka in order to meet the fundamental policy objectives of sustainable
growth, equity and poverty alleviation. The research programme spans
across six broad themes.

The IPS was conceived in the mid-1980s as an autonomous institution

„„ Macro, Trade and Competitiveness (Macroeconomic policy and
designed to promote policy-oriented economic research and to
structural reforms; Trade and regional integration; Investment and
strengthen the capacity for medium-term policy analysis in Sri Lanka.
finance; SMEs, industry and entrepreneurship; Intellectual property)
It was established by an Act of Parliament in December 1988 and was
„„ Health, Education and Labour (Skills and education; Demographics;
formally set up as a legal entity by gazette notification in April 1990.
Health; Labour markets; Women and workforce)
From its inception, the IPS was supported through a collaborative project
„„ Migration and Urbanisation (Migration and remittances; Inward
between the Royal Netherlands Government and the Government of Sri
migration; Urbanisation; Internal migration; Tourism)
Lanka under four phases of operations to allow the Institute to gradually
„„ Poverty and Social Welfare (Poverty and inequality; Social protection;
diversify its income and resource base. In the interim, the IPS has
Financial inclusion; Vulnerability; SDGs)
been successful in establishing its own Endowment Fund and setting
„„ Agriculture and Agribusiness Development (Food security; Agriculture
in motion the transition to full financial independence with the formal
policies and institutions; Agriculture productivity; Agribusiness value
ending of the fourth phase of operations in June 2006. The IPS moved to
chains)
its own head office in September 2010.
„„ Environment, Natural Resources and Climate Change (Environment
and natural resource policies; Green economy; Disaster risk
The IPS functions under the key ministries involved in economic policy
management; climate change; Sustainable energy)
making and implementation in Sri Lanka, working closely with the
government, private sector, development partners, civil society and
IPS research staff consists of some of the best and most eminent
academia.
research professionals in Sri Lanka. Each Unit is headed by a Research
Fellow who has doctoral qualifications and years of practical experience

Our Vision in their respective fields. They are assisted by a dedicated and highly
qualified service staff that assists in the smooth running of the IPS
To be a globally-recognized research institute that is a catalyst for Sri operations.
Lanka’s socio-economic transformation.

4
S
outh Asia Economic Summit (SAES) was launched in 2008. To date,
11 Summits have been held each year in the capitals of South
Asian countries.
The Summit has provided a regional platform for discussing and
debating socio-economic challenges facing the region. SAES also aims
to foster and develop regional integration and co-operation among the
South Asian countries. Each year, the SAES brings together stakeholders
from the government, private sector, research/academic community,
donors and civil society from within and outside the region with an
interest in South Asia. SAES has evolved into one of the most looked-
forward to events in South Asia.
The initiative has been led by five prominent South Asian think tanks
which have taken turns in organising and hosting the annual event
in one of the SAARC nations on a rotating basis. They are: Centre for
Policy Dialogue (CPD), Bangladesh; Research and Information System
for Developing Countries (RIS), India; Sustainable Development Policy
Institute (SDPI), Pakistan; South Asia Watch on Trade, Economics and
Environment (SAWTEE), Nepal; and the Institute of Policy Studies of Sri
Lanka (IPS), Sri Lanka.
Focus of SAES XII
SAES XII focuses on the theme of Shaping South Asia’s Future in the
Fourth Industrial Revolution (4IR).
For South Asia, as in many other developing country regions, the benefits
and pitfalls of 4IR are significant. On the one hand, the 4IR may allow
countries to leapfrog development stages. Those with better established
manufacturing bases or with resources to invest in technologies stand to
benefit. On the other hand, technological-driven productivity that drives
down costs of production in advanced economies can hasten ‘premature’
de-industrialisation in the developing world. For many, the threat of
human labour displacement by automation is very real.
To this end, the disruption of technology through 4IR presents a
watershed moment for South Asia. 4IR is not only driving the Fourth
Wave of Globalisation, but it is also introducing new tools to assess and
understand competitiveness. Concepts such as entrepreneurial culture,
embracing disruptive ideas, multi-stakeholder collaboration, critical
thinking, meritocracy and social trust – along with more traditional
components like ICT and physical infrastructure, macroeconomic
stability, property rights, and years of schooling – will form the defining
features of economic success in the 4IR.
South Asia’s challenge, therefore, is not merely limited to technological
adoption, but rather a broader challenge to reform its laws, institutions,
and economic structures that can adequately respond to a world that
does not recognise national borders. In this regard, the South Asian
region as a whole is being afforded with another opportunity to revisit
means of cooperation in areas such as value chain linkages that
circumvent traditional barriers to trade, improved resource management
and technology transfers and innovations that could set up the region as
a leader for other developing countries and regions.
Global Presence
Invited guests from abroad will include participants from SAES partner
institutions, policymakers and experts from SAARC countries as well as
experts invited by the co-organisers. They will be joined by high-level
representatives from key stakeholder groups in Sri Lanka including
policymakers, experts, development partners and the private sector.
Outcomes
The discussions held at the Summit will help identify and prioritise the
prospects for cooperation and the challenges that need to be addressed
in shaping South Asia’s future in the 4IR. The Summit which brings
together the regions’ leading minds to discuss some of the central
development issues and themes impacting South Asia, its people and
the planet, will be instrumental in influencing the policy agenda of South
Asian governments. Participants will be welcomed to contribute high
quality articles to a special issue of the South Asia Economic Journal
(SAEJ), which will be brought out after the Summit.
5
Sink or Swim?
technological preparedness as well as creating a complementary
economic ecosystem. To do so, policymakers and private sector
stakeholders alike should be cognizant of three critical pillars of 4IR
readiness: digital readiness, human capital readiness, and economic

Sri Lanka in the agility. This article briefly discusses Sri Lanka’s position against these
three pillars.

Fourth Industrial Digital Readiness

At its most basic level, a significant proportion of 4IR technologies
are emerging around the use of computers and the IoT. Therefore, Sri

Revolution
Lanka’s low computer literacy rates and lack of internet access makes
it challenging for the country to absorb, implement, and leverage 4IR
advancements. Only 34% of Sri Lanka’s population uses the internet.
Whilst this is a rapid rise from less than 1% in 2000, and is higher
than most other South Asian economies, it is significantly lower than
comparator economies such as Malaysia, Thailand, and Vietnam.
This lack of internet usage corresponds with a low national computer
By Kithmina Hewage
literacy rate of 22.9% in 2018.
The technology-driven, Fourth Industrial Revolution (4IR) will mark
Notably, however, Sri Lanka has over 32 million cellular mobile
significant changes in the modern way of life. However, unlike other
subscriptions (70% of the population owns a mobile phone), albeit
industrial revolutions, 4IR technologies are significantly more invasive,
with just over 7 million fixed and mobile broadband subscriptions
complex, and evolve rapidly. 4IR, which includes artificial intelligence
(approximately 21% of the population). Meanwhile, mobile cellular
(AI), the internet of things (IoT), intelligent robotics, 3D printing, and
networks cover 95% of the country’s population. The disparity in the
neuro-technological brain enhancements, is the conflation of different
availability of technological infrastructure and usage is most likely
technologies that are spurring changes in multiple spheres at the same
due to structural factors such as gender and sectoral disparities.
time.
For instance, the gender gap for internet usage is estimated to be
as high as 40%. Furthermore, there are significant disparities in IT
The importance of 4IR and Sri Lanka’s preparedness for it has gained
literacy levels between the urban (36.9%), rural (22.0%), and estate
growing prominence in policy discourse, albeit at a superficial level.
(8.6%) sectors. These disparities thus indicate significant structural
Cultivating a “shared, trusted digital environment that is a driver of
weaknesses of Sri Lanka’s digital readiness for 4IR.
inclusion, economic development, and social progress” is paramount
to succeed in the 4IR era. Therefore, Sri Lanka needs to focus on both

6

In addition, Sri Lanka continues to perform poorly in the Global
Innovation Index, especially in indices related to institutions and human
capital and research. The combination of structural weaknesses along
with an inadequate ecosystem is a cause for concern.
Human Capital Readiness
To achieve human capital readiness, an economy has to create a high-
skilled, agile, and multi-faceted labour force, with transferable skills,
to face potential disruptions. Sri Lanka has long touted its high literacy
rate. However, basic literacy and numeracy based employment are
likely to suffer the most during the 4IR era. The country’s relatively low-
level of enrolment in tertiary education is, therefore, concerning.
The IPS State of the Economy Report 2017 notes that only 10% of age
20 and above population has formal professional or technical training
relevant to their occupation. Even in university, a vast majority study Arts
subjects and relatively fewer study Science, Technology, Engineering,
and Mathematics (STEM subjects) – a priority area under 4IR. Notably,
even at the school level, the share of subject qualified teachers in
STEM subjects are lower than the recommended level. This indicates
low human capital readiness. Moreover, the economy will be unable to
leverage technology spill-overs and other ancillary benefits that may
come through FDI and integration into global value chains, as its labour
force becomes unattractive to high-tech, 4IR-based industries and
investments.
Economic Agility
The rate and scope of technological and socio-economic change in
the 4IR era have placed a premium on the forward-looking ability and
responsiveness of an economy. Over the years, Sri Lanka’s export basket
has gone through very little diversification, and the economy has failed to
integrate into regional and global value chains.
Critically, only 6.7% of Sri Lanka’s manufacturing value addition is
estimated to take place through medium hi-tech and hi-tech industries.
As such, the country is dependent on industries that are susceptible to
losing value and becoming obsolete during the 4IR. For example, sectors
like the textile and garment industry could potentially be affected by
labour displacement, due to technological disruption. Its true impact,
however, would depend on labour market conditions and the labour/
capital ratios that prevail at the time. What is more obvious is that Sri
Lanka’s overwhelming dependence on a limited spectrum of industries
that employ low-skilled labour will pose a significant challenge and
diminish its economic agility further.
The agriculture sector, however, could potentially gain considerably
through 4IR. Firstly, given the sector’s increased vulnerability to extreme
weather conditions and diseases, 4IR technologies could improve
information flows and find solutions to minimise such shocks. Secondly,
given that the sector is experiencing an increasing labour shortage,
labour replacing technologies could improve productivity without causing
much disruption. However, distrust of new technology, along with the
unavailability of necessary capacities, has somewhat hindered the
integration of technology into the production process thus far. Therefore,
concerted efforts to improve trust in new technologies while improving
the usage capacity of farmers and other stakeholders is vital.
Much of Sri Lanka’s services sector growth has been in non-tradable
services, such as transport and retail. Although these services have
not experienced any transformations thus far, eventually, technologies
such as self-driving vehicles will create disruptions to the labour market
and the structure of the sector. Meanwhile, Information Communication
Technology (ICT), Business Process Outsourcing (BPO), and professional
services have become one of the fastest growing exports in Sri Lanka,
with great technological maturity. For instance, the ICT industry is the
fourth largest export earner to the country and was ranked 11th in
A.T. Kearney’s Global Services Location Index. Therefore, among Sri
Lanka’s exports, the ICT industry is arguably one of the best placed to
leverage existing technological maturity to diversify and scale up in an
economically agile manner.
Conclusion
The scope and the pace of technological change and its consequent
impacts pose challenges and opportunities alike to both developed
and developing economies. However, developing countries such as Sri
Lanka are particularly vulnerable to being left behind and being unable
to adequately respond to socio-economic disruptions, due to structural
weaknesses and capacity constraints. Under these circumstances, while
experiencing a significant change in the digital and communication
spheres, Sri Lanka is still a nascent economy in its preparedness for the
4IR.
To a great extent, much of the basic physical infrastructure required (i.e.
mobile and internet coverage) is already available and could be used as
a meaningful platform. The government, as well as several private sector
firms, have recently introduced digital economy and digitalisation policies
to prepare for 4IR.
However, the country has not thus far created a conducive ecosystem
that facilitates the integration of modern technologies into economic
and social facets of daily life by addressing structural issues. Success,
therefore, depends heavily on identifying and addressing wider structural
and institutional impediments, followed by a careful diagnostic of each
economic sub-sector and recognising how 4IR can be used for greater
and more inclusive economic growth.
7
 My Way or the
Huawei:
Global Battle for
5G Dominance and its
Impact on Sri Lanka
By Damithri Munasinghe
The ongoing battle between the US and the Chinese tech giant, Huawei, is
escalating due to both parties’ eagerness to dominate 5G technology, the
next major global technological revolution. It will define the future of the
world wide web, creating a new internet architecture.
5G is a network which connects millions of Internet of Things (IoT) devices
and is expected to transform lives globally. 5G technology operates on
millimeter waves, which have limited reach. Hence, the number of devices
that are able to connect to a single cell tower is limited and therefore
requires a great deal of investments. Being ready for 5G involves building
the required infrastructure, testing, and launching them effectively.
Nations are competing against each other to become the global leader in
supplying this 5G network. According to the 5G Readiness Index prepared
by Analysys Mason, USA is tied with China and are in the lead, closely
followed by South Korea and Japan.
Amidst the growing trade war between the US and China, the US
government recently blacklisted Huawei, creating chaos around the globe.
This blog attempts to highlight the factors that prompted this accelerating
tension and in turn discuss how it might affect Sri Lanka.
Causes for the Huawei Ban
The decision to outlaw Huawei stemmed from security concerns; the
US wanted to avoid the possible threat of cyber espionage due to the
firm’s alleged close relationship with the Chinese government. However,
although the US blacklisted Huawei on the grounds of security, there has
been no public evidence thus far that proves any of the claims made.
With emerging technological advances, increased security risks are
inevitable. Implementing new measures to an increased scope of cyber-
safety would tackle this issue. For example, France and Germany have
agreed to accept Huawei’s telecom infrastructure after strengthening
their security measures. Despite warnings, the UK has also allowed
Huawei’s contribution to non-core elements of infrastructure. Following
the US government’s decision to add Huawei to a trade blacklist, making
it extremely difficult for the company to do business with the US, Google
halted the company’s android license, revoking the services of some
critical apps like Google Chrome, Gmail, and the Play Store. . This has
affected Huawei’s sales worldwide.
Significance of 5G
The motivation behind acquiring 5G infrastructure as fast as possible has
to do with its salient features, among which the dramatic improvement
in speed is remarkable. For example, it would take around 26 hours to
8
download a high definition movie using 3G, and just six minutes with 4G.
With 5G, it would take only 3.6 seconds. It also has a 1 millisecond latency
rate, which enables real time interactivity. Compared to the 4G latency
rate, this is 60 to 120 times faster.
This wireless technology also holds great potential to promote inclusive
and sustainable societies by transforming healthcare, education, transport
and so on. For instance, the ability to connect autonomous cars with street
infrastructure and other cars along with their exact position could save up
to 22,000 lives, annually. Similarly, surgeries could be performed from the
other side of the world, with robotic-surgeons controlled in real-time by
expert surgeons, assisted by other surgeons simultaneously. Virtual and
augmented reality techniques could be included in education with the low
latency rate, making it efficient. Robots would be able to communicate
their tasks to each other wirelessly in factories, improving their
productivity. In addition to accelerating smart city functions for example,
estimates suggest that 5G technology can create three million jobs and
contribute a staggering US$ 500 billion to the GDP of the US.
Sri Lanka’s Position
This massive breakthrough in technology can herald
significant changes in Sri Lanka as well. A few network
service providers have already taken initiatives to
deploy this technology in the country. In 2018, Huawei
and Ericsson joined hands with Dialog Axiata and
carried out the first trial of 5G technology in South
Asia. This demonstration showcased the capabilities of
5G using Huawei’s technology, setting a foundation for
broadband’s future evolution. They also teamed up with
Sri Lanka Telecom and carried out a field trial of pre-5G LTE
technology. Mobitel has also stated that they plan to invest US$ 50
million to embark on their 5G network.
Being an active ICT service provider in the island for over 20 years,
Huawei has helped Sri Lanka commence commercial operations of
4G-LTE services, making it the first country in South Asia to do so.
Despite the current global issues it faces, Huawei plans to deploy this
technology in Sri Lanka as soon as possible, focusing on four main areas:
investment in knowledge transfer and human capital development,
introduction of latest technologies such as 5G, IoT, AI and cloud, share
and facilitate global expertise for ICT developments, and offer smart city
solutions. Therefore, if facilitated with beneficial policies, it could boost
the country’s GDP as an emerging market in South Asia, create jobs, and
increase productivity. This would also act as a platform to drive innovation
in the technological backdrop. However, the high cost, the need for
skilled personnel, and security concerns remain challenges in acquiring
5G. Moreover, highly sophisticated infrastructure is required to build up
this network. Therefore, making it accessible to rural areas is another
challenge that needs to be considered.
In order to reap these benefits while overcoming these challenges, Sri
Lanka has to implement a flexible regulatory framework that keeps up
with modern developments. Ensuring data privacy and cyber security
to meet the expectations of the customer is essential. Encouraging and
laying a strong foundation for long-term investments in communication
networks will also be beneficial. By working closely with industries,
investors, and regulators the government will be able to determine how
best to deliver real economic benefits. The world economy is at the cusp
of fully embracing an internet-based socio-economic landscape, from the
production process to social media. Therefore, it is vital that Sri Lanka
prepares itself adequately for these changes and embrace its benefits,
while cautiously addressing concerns, rather than blindly shunning the
technology due to preconceived biases.
9
Succeeding in
By Ashani Abayasekara

IPS’ New Thinkers Symposium saw researchers from several think

tanks presenting their work on broad topics, under the theme of

the 4IR Era:

Technology and Economic Transformation. They highlighted the
need for dynamic and innovative thinking to succeed in the era of
the Fourth Industrial Revolution (4IR), in the areas of agriculture,
megatrends, social security, trade, and e-governance.

Opportunities and Agriculture

Nimesha Dissanayaka of IPS stressed the importance of embracing
modern technology in agriculture, particularly in boosting agricultural
production and facing risks such as diseases and extreme weather

Challenges for conditions induced by climate change. Given Sri Lanka’s high
vulnerability to climate risks, implementing climate change adaptation
practices, for instance via reliable climate information services, are of
extreme importance. To this end, developing countries are increasingly

Sri Lanka
embracing novel methods such as mobile apps, given the unreliability
of traditional weather forecasting methods.

Presenting the findings of an IPS study, conducted among 900

farmers in six districts, Ms. Dissanayaka pointed out that the majority
of farmers opted for traditional forecasting methods, such as weather
reports, past experiences, and local observations. Surprisingly, the
reason was not the lack of mobile phone usage – 75% of interviewed
farmers used a mobile phone – but their hesitance to adopt more
sophisticated methods. In addition to the distrust of new methods, the
lack of availability of such methods is also an issue. Unlike many other
countries, Sri Lanka has no agriculture-specific weather app; currently
agricultural weather information is conveyed to farmers through
SMS or voice messages. In this context, she highlighted the need
for integrating weather information with other harvest and market
information, to encourage farmers to use ICT-based weather platforms
more actively.

Megatrends
Yudhanjaya Wijeratne from LIRNEasia shared his observations on
how the Asia Pacific region will look in 2030, based on megatrends
– large structural shifts that will impact the social, economic, and
environmental conditions in the context of the 4IR. One key area which
10

To take advantage
of positive aspects
of 4IR, including
technological diffusion
and export diversification
via technological
transformation, Adam
Collins from the
Lakshman Kadirgamar
Institute (LKI) stated
that Sri Lanka needs to
strategically position itself
at the hub of the Indian
Ocean
requires attention is population growth and demographic shifts, which
are beyond human control. While population growth appears to be on
the decline globally, Mr. Wijeratne drew attention to the rising population
levels in the Asia Pacific region, driven mainly by China and India. While
China is experiencing a rapidly ageing population and associated declines
in productivity, India is seeing more workers entering the labour force.
Urgent solutions are needed to accommodate this massive influx of urban
dwellers, in terms of meeting water, energy, and infrastructure demands.
Such issues are bound to affect Sri Lanka as well in the future, for which
the government needs to be prepared.
Social Security
Navam Niles, representing the Centre for Poverty Analysis (CEPA),
discussed the impact of the 4IR on the future of social security, with the
emergence of digital platforms that enable gig work, such as Uber. He
drew attention to the phenomenon of ‘independent workers’: those who
are neither proper employees – as they are not necessarily dependent
on one employer and do not have full control over their opportunities
– nor are self-employed. Such workers, he pointed out, have typically
less bargaining power, and therefore have limited ability to negotiate
contracts that secure social protection benefits. Individual-level costs
of this development include workers not being able to save enough to
secure their future needs such as retirement, whereas at the societal
level, the lower ability of workers to pay taxes leads to a vicious cycle of
lower government revenue, lower government investments, and lower
government expenditure on social protection.
Mr. Niles identified two priority areas in dealing with such consequences.
First, businesses should restructure their business models on the gig
economy, using the same tools that allow for more fragmented work –
such as auto enrollment systems – to contribute to more social security
provisions. Second, governments will have to take on a more active role
to maintain social security, by absorbing negative externalities caused
by gig economy related developments.
Focusing on Sri Lanka, he pointed to the large informal economy and
unprepared institutions as unique challenges, and noted that in addition
to improving social welfare, the country needs to simultaneously invest
in a labour market that facilitates adjustments to 4IR-related economic
changes, including protecting and re-skilling workers for the knowledge
economy. To this end, an economic policy that complements openness
and stability is key, he opined.
Trade
To take advantage of positive aspects of 4IR, including technological
diffusion and export diversification via technological transformation,
Adam Collins from the Lakshman Kadirgamar Institute (LKI) stated
that Sri Lanka needs to strategically position itself at the hub of the
Indian Ocean. He noted that while the Indian Ocean economy, as one
of the most dynamic economic regions containing some of the busiest
shipping lines and undersea cables, is a crucial component of today’s
economy, there are several key challenges, primarily centering on
the issue of connectivity, that inhibit the spreading of technology to
generate economic transformation.
These include infrastructure gaps – specifically in the quality of ports
that act as a deterrent to trade and investment – non-tariff barriers
that impede technological diffusion, development gaps with many
developing countries lacking the necessary human capital to absorb
external technologies, and nascent regional economic governance,
which remained ‘institution light’. Dealing with such challenges calls for
the right national policies and stronger regional cooperation.
E-governance
Speaking on the increasing application of ICT for delivering government
services, Rehana Mohammad from Verité Research noted that there
are many economic benefits of e-governance systems, including
the enabling of faster, more accessible, inclusive, and efficient
public services. But she cautioned that the path to getting there is
challenging, with large-scale e-governance and IT projects having
a dismal record of success: according to a 2016 World Bank report,
90% of such projects are deemed either total or partial failures. The
key reason for this high incidence of failure is the misconception that
e-governance is about technology, whereas in reality it is fundamentally
about governance.
Ms. Mohammad drew attention to three specific points in this regard.
First is a failure to reengineer manual processes, as in the case of Sri
Lanka’s Customs Department, where a paperless system implemented
for custom documents was affected by due to non-recognition/
acceptance of digital signatures. Second, the culture in which most
government offices operate – one of secrecy and resistance to
compliance – makes it difficult to realise the benefits of openness and
transparency that e-governance is expected to provide. Third, there
are strong vested interests in keeping processes slow and manual,
where corrupt bureaucracies extract rent from people. Thus, there is a
high risk in introducing high-tech infrastructure, without a supportive
foundation of strong governance.
To Sum Up
The session identified several ways in which Sri Lanka can capitalise
on opportunities and minimise risks in the era of the 4IR. Key among
these are embracing novel technologies in line with user needs,
protecting and re-skilling workers for the knowledge economy, stronger
regional cooperation, and governance reforms in the public sector,
backed by economic policies that complement openness and stability.
11
Technology and Economic
Transformation: Is Sri Lanka Prepared to
Ride the 4IR Wave?
By Kithmina Hewage and Damithri Munasinghe
Sri Lanka boasts of a relatively high literacy rate of 92 per cent
amongst its population. However, its computer literacy rate is a meagre
27.5 per cent. Meanwhile, the World Economic Forum’s Future of
Production Report categorises Sri Lanka as a nascent economy, and
shows significant lags in its sub-indices on technology and innovation,
economic complexity, technology and innovation, and global trade and
investment. Each of these, points to deep structural weaknesses in Sri
Lanka’s economy, educational structure, and cultural fabric. However,
the emergence of the technology-led Fourth Industrial Revolution
(4IR) is generating its own urgency to address these concerns, while
simultaneously creating ample opportunity for growth. If Sri Lanka is to
circumvent the middle income trap and achieve high income status, its
economic transformation has to be driven by technology and innovation.
This blog briefly discusses some salient points on this matter, with a
particular focus on those highlighted at IPS’ New Thinkers’ Symposium
(NTS).
12
Governance
Technology has been recognised as a critical means of improving
governance processes. The digitisation of government bureaucracy not
only improves the efficiency of service delivery in institutions, but also
reduces the scope and opportunity for bribery and corruption. Thus,
governments across the political spectrum have undertaken large-
scale projects to introduce e-governance systems, albeit with limited
successes. The root cause of this, however, is governance failures, rather
than technological failures. Three key factors were identified during
discussions at the NTS: (i) the absence of a cross-cutting policy vision,
(ii) lags between the introduction of technology and complementary
legislation, and (iii) scepticism on the use of technology, especially by
senior policymakers and bureaucrats. The National Digital Economy
Strategy, created by the McKinsey Group for the Government of Sri
Lanka, may prove useful in this regard. However, it is important that such
a strategy is continued as a bipartisan venture and is not duplicated
every time a change in political power takes place. In recent years,
Sri Lanka has introduced several positive e-governance initiatives,
such as the online vehicle revenue license service and the acceptance
of e-documents in the export and import process. However, as
 to enhance and facilitate trade, further steps need to be implemented to
Technology has been boost cross border ecommerce, and encourage new economic tools such
as blockchain technology, which would make it easier for SMEs to access
recognised as a critical the global marketplace.

means of improving Discussing the case of MAS Holdings, Head of FemTech, Gayani
Abeysinghe, observed that companies also face the challenge of a
governance processes. male dominant workforce in technology and innovation, due to a lack of
females taking up STEM (science, technology, engineering, mathematics)
The digitisation of education. Studies around the world demonstrate that a lack of diversity
in the labour pool often translates to limited scope for innovation and
government bureaucracy ideas as well. As a result, companies in the innovations sector often
look towards foreign recruits to fulfil gaps in expertise. Having more
not only improves the female participation in STEM education also leads to other broader
social and economic benefits such as having more fiscal stability for
efficiency of service women. Moreover, labour policy reforms related to flexible working hours

delivery in institutions, and work-from-home options would facilitate the use of technology
and improve labour force participation as well. These views mirror IPS

but also reduces the research on female gender force participation.

scope and opportunity for Environmental Conservation

Although not often discussed, technology and innovation play a
bribery and corruption. significant role with regard to environmental conservation. Technology-
led conservation efforts can drastically reduce costs and enable access
Thus, governments across to locations that are not normally reachable, in a short time frame.
Furthermore, technology and innovation are paramount to manufacture
the political spectrum scalable, environmentally-friendly alternatives to replace substances
like plastic or polyethylene, which are toxic to the environment. As noted
have undertaken large- in previous IPS research, this should also extend to existing economic

scale projects to introduce activities such as sustainable eco-tourism for conservation-based

development.

e-governance systems, Unfortunately, in Sri Lanka, the discourse on environmental conservation

albeit with limited
successes
demonstrated during the roll-out of the e-document policy, the lag time
in amending the necessary legislation severely delayed the successful
implementation of the entire policy.
Similarly, smart classrooms are being introduced more into schools.
Whilst such policies help introduce the younger generation to important
technological tools, it is vital that school curricula are also updated in
a manner that encourages critical thinking and problem solving whilst
equipping teachers with the necessary skillsets to fully utilise such
technologies. Furthermore, it is important to be cognizant of the wide
disparities that exist between schools within the Sri Lankan educational
system. As such, smaller scale technological interventions could
potentially have greater marginal benefits to the country.
Private Sector
Access to technology reaps a multitude of benefits in the private sector.,
Technology can lower barriers of entry so that any firm, regardless of its
size, can penetrate the export market. It not only boosts local businesses’
ability to innovate, by integrating technology into their current scope of
work, but also to expand their ventures in the process. The government
has taken a few affirmative initiatives, such as the double tax policy,
which encourages spending on innovation, and obtaining grants on R&Ds,
which have incentivised the private sector to utilise technology into their
work with greater confidence. Despite such measures being undertaken
is limited to a narrow scope of issues, and is perhaps reflected in the
island being named as one of the 40 countries with the least funding for
conservation. According to marine biologist, Asha de Vos, transforming
ad hoc conservation activities by corporates or individuals into a
long-term strategy would be sustainable and more constructive. By
educating and empowering the youth to go green, Sri Lanka would be
able to move forward and drive change in the areas where environment
issues are prevalent. Therefore, upgrading the educational curriculum
to include issues such as conservation is fundamentally important,
with suitable technologies such as computer-supported collaborative
learning to complement such efforts. Furthermore, given that developing
countries are often priced out of modern technologies associated with
environmental conservation, if aligned with the new Innovation and
Entrepreneurship Strategy, Sri Lanka could become a pioneer in creating
technologies that are more appropriate for other developing countries.
Way Forward
Given the above, it is abundantly clear that technology-based solutions
for better economic performance should not occur in vacuums. Rather,
Sri Lanka should embrace a common policy vision that is inclusive and
far-reaching, with an identified goal of elevating the country’s economic,
social, and cultural dynamics through technology. In order to achieve
this, while policy changes in areas such as education and legislation are
important, a simultaneous move should also take place to address the
trust deficits citizens may have regarding the use of technology, be it
on issues such as privacy or simply a cultural scepticism of new media.
Sri Lanka should not be left behind by other developing countries in
South-East Asia, which are fast embracing technology and innovations to
transform their economy.

13
 Digitising the
Economic Space:
Enter, Entrepreneurs
of Sri Lanka!
By Harini Weerasekera and Dinushka Paranavitana
IPS’ New Thinkers’ Symposium featured an Innovations Hub, a space
for entrepreneurs and innovators to showcase their work. Citra Labs,
SYNAPSYS, Dialog Digital Services, and Jigsaw Ensemble presented
their work, in line with the Symposium’s overall theme of Technology and
Economic Transformation. The discussion highlighted the manner in which
innovative products and services address economic policy issues that are
of interest to the research community.
Synapsys
SYNAPSYS provides solutions to issues faced in the tea industry, with a
focus on integrated payment schemes and supply chain bottlenecks. The
process is designed such that intermediaries between the supplier and the
factory are given mobile devices enabled with a software that is linked to
a weighing scale and a thermal printer. The tea plucking community can
get their leaves weighed on this scale, which then transfers the information
to the collector, factory, and the intermediary. This is done either using a
specialised sticker printed or via SMS, enabling all parties to have precise
weights of tea leaves and a record of the relevant payment information to
be paid by each party.
SYNAPSYS identifies this as a solution to the rising debt burden and
liquidity issues faced by the tea plantation workers. Previously, this
segment of individuals was categorised as an underbanked community.
However, this system has enabled individuals to have access to more
credit facilities, as they are now able to provide proof of employment and
daily/weekly income earned. IPS research has previously stressed the
importance of improving access to finance in the tea sector in this manner.
14
In addition, factories benefit through this system, as corruption and
manipulation of the weight of tea leaves are reduced. Factories are able
to plan out the production schedules prior to receiving the tea leaves,
improving efficiency and reducing waste. The system is currently being
used in 20 factories across Sri Lanka and over 50,000 individuals have
benefited from it.
Citra
Citra is Sri Lanka’s first social innovation lab, a joint initiative between
the Ministry of Science, Technology and Research and the United Nations
Development Programme (UNDP), whose main aim is to support national
development priorities through citizen-centered solutions. Many of the
solutions that Citra provides are for issues that are brought to them by
the public sector.
Citra’s key mandate is to generate innovative ideas that could enhance
the services provided through public sector officials. One such
programme was designed to equip public servants with the skills to
design and plan future projects. Upon a request made by the Dehiwala
– Mount Lavinia Municipal Commissioner, Citra designed a mobile
application and web platform that encouraged the general public to
identify dengue mosquito breeding sites. The platform is designed to
alert the relevant authorities to high risk areas and provide users with
alerts on inclement bad weather conditions and methods of eradicating
dengue mosquito breeding sites. The platform also allows the community
to collaborate and create event pages for small-scale community
cleanup projects.
Citra has plans to move into providing solutions for solid waste
management and developing an effective disaster response
management system. IPS research has underscored the importance
of providing such information and technology-led solutions in disaster
management and agricultural spheres; hence it is encouraging to see
practical applications being developed to address these pressing policy
concerns.
Dialog Digital Services (DDS)
With the belief that any individual should have access to education,
healthcare, and finance, DDS aims to provide entry points to those who
cannot access these facilities by traditional means.
DDS has digitised the health care industry, moving away from
traditional methods of channelling doctors to mobile based methods.
The e-channelling process has been automated so that it is easily
accessible by even those who are not tech-savvy. For example, the
e-channelling process can be done either using a mobile app through a
smart phone or by a simple phone call.
In addition, DDS provides micro insurance services that are aligned
with government policies. These insurance policies create a platform
where individuals do not have to pay large lump sum premiums but
would have the option of paying a smaller, per day premiums.
In the Fin-Tech space, they aim to provide micro finance services
by providing a digital footprint/financial credit trail for individuals
who do not have the necessary collateral to access finances. DDS
has reinvented ways of measuring credit scores: by identifying the
customer’s relationship and past payments or expenditure records with
all Dialog services, and then using this information to give individuals a
credit rating.
Jigsaw Ensemble (JE)
Jigsaw Ensemble is a boutique product development company that has
developed digital solutions in transport, online payment processing/
banking, food delivery, and legal services sectors.
One of the products in function is OGO Pay, an online payment platform
which stores and processes credit card information. It is designed
to work with apps and websites enabling subscriptions or recurring
payments to be performed through credit cards. OGO Pay directly links
the app users with local banks in order to make transactions faster,
convenient, and highly secure. Lawganizer is another creation of Jigsaw
Ensemble, designed to digitise the legal system in Sri Lanka. This allows
lawyers to store and organise information on legal cases, manage
consultations and enable collaborative work with colleagues.
The ongoing developments of the platform have a digitised document
management system and a discussion forum for public legal issues. This
forum allows individuals to directly access and cross reference legal
information. It also allows retired lawyers/judges to contribute in terms of
information sharing, providing advice and consultations as required.
It is encouraging to see the private sector providing practical and
innovative tech-driven solutions to pressing policy issues often discussed
in the research space, such as poor accessibility to finance, weak
public sector capacity, solid-waste management and other health/
environmental concerns.
15
 By Nipuni Perera and Chinthani Sooriyamudali

IPS’ New Thinkers’ Symposium saw discussions at the Policy Hub focus
on some of recent government initiatives aimed at creating an enabling
environment for economic transformation in Sri Lanka through technology
and innovation under the Symposium’s overall theme of Technology and
Economic Transformation.

Policies Pave An ecosystem of initiatives for boosting

export and FDI competitiveness
the Way for Advisor to the Ministry of Development Strategies and International Trade
(MODSIT), Anushka Wijesinha, outlined the need to address problems

Sri Lanka’s Economic

related to limited export diversification, pressures of trade liberalisation,
and the country’s poor business climate, when striving to enhance export
competitiveness and FDI attractiveness. In this regard, research by IPS

Transformation Through also highlights the importance of diversifying exports into potential
new products and markets and addressing trade and transport related

Technology
bottlenecks as crucial priorities in boosting trade competitiveness.
Commenting on some of the relevant projects that MODSIT is involved
to this end, Mr. Wijesinha noted that an ecosystem of initiatives is being
implemented to create an enabling environment for exports and FDI.

Some of the key policy initiatives include the National Export Strategy
and the National Innovation and Entrepreneurship Strategy 2018-2022
that provide the supportive framework to upgrade export competitiveness
by identifying new potential sectors, such as electronic components
and boat building, as well as support for technology upgrading – both of

16
which are crucial to diversifying Sri Lanka’s export basket. Another
policy is the granting of financial incentives to help firms innovate. For
instance, the Market Access Support Programme and the Enterprise
Innovation Programme provide financial incentives to firms on a
competitive basis, to develop new products to be tested in new
markets. Meanwhile, efforts are also being taken to address business
climate issues. To this end, the Ministry and implementing agencies
are working to address problems identified by the World Bank Doing
Business Index that hinder business competitiveness, while specific
forums, such as the Exporters Forum and bilateral investment
dialogues, are used to identify and address issues that arise from time
to time.
Furthermore, establishing a Single Window that allows parties involved
in trade and transport to lodge information and documents with a
single-entry point to fulfill regulatory requirements, is another crucial
element of this ecosystem. Based on public-private consultations, IPS
research provides insightson developing a Single Window Blueprint for
Sri Lanka for facilitating smoother flow of trade. Thus, this ecosystem
of policy initiatives can help make the trade and investment
environment more favourable in general, and diversify Sri Lanka’s
export basket to include new, innovative products in particular.
Economic diplomacy for transformation
Mahesha Jayawardene, from the Ministry of Foreign Affairs,
underlined the role of economic and commercial diplomacy in
facilitating economic transformation. The recent integration of foreign
policy with the trade arm can support local businesses to compete in
new markets, with innovative products. Some of the policy initiatives
undertaken by the Ministry in this regard include the introduction of
KPIs on tourism, investment, trade, and foreign employment units for
each foreign mission, efforts taken by missions in promoting Sri Lanka
in selected markets, and contributions towards negotiating bilateral
and multilateral Free Trade Agreements (FTAs).
Economic transformation through
enhanced female labour force
participation
Priyanka Krishnamoorthy of the Ministry of Finance focused on the
government’s efforts to propel economic transformation through
increased female labour force participation (LFP). As explored by IPS
research, opportunities for women to enter the labour market have
declined over time.
Based on information gathered by the Department of Census and
Statistics under the Labour Demand Survey, Ms. Krishnamoorthy
highlighted three overarching reasons for employers’ low demand
for female employees: 1. household roles and responsibilities (child
care, elder care, and housework); 2. human capital mismatch (lack of
necessary skills for the workforce); and 3. gender discrimination at
the workplace.
The 2019 Budget attempts to improve the female LFP by intervening
at relevant lifecycle events. For example, the Budget proposes loans
for pursuing higher education at non-state education institutions,
which aim to expand women’s access to tertiary education, while
the government hopes to encourage private sector internship and
apprenticeship programmes to improve job opportunities.In order to
encourage higher female participation in the labour force, the Budget
proposes to extend the maternity leave up to four months and to
bear a portion of the cost of maternity leave borne by private sector
companies.
Additionally, there are proposed measures for expanding child-
care facilities. In an effort to enhance greater female participation
in decision-making, a sequenced approach to increase female
representation in boards of listed companies is proposed. However, as
IPS research shows, female economic empowerment strategies need
to take into account the differing settings and backgrounds of women.
Building skills for economic
transformation
Human capital requirements for enabling technology-driven economic
transformation was also flagged as a critical policy priority, during
the discussion. The importance of promoting STEM based learning
(science, technology, engineering and maths) was highlighted in this
regard.
Tying it all together: Systematic
collaboration for tech-led economic
transformation
Policy initiatives geared towards economic transformation are well
underway in Sri Lanka and range across a host of policy priorities,
with an emphasis on promoting technology and innovation. However,
driving Sri Lanka’s economic transformation, led by innovation and
technology, requires systematic collaboration across a host of public
sector institutions.
17

By Nisha Arunatilake and Chathurga Karunanayake
A few decades ago, typing and shorthand courses were popular amongst
young girls aiming for low-skilled office jobs. But today, no one aspires to
be a typist. With the proliferation of computers, most do their own typing.
But, the demand for graphic designers and copy editors have increased,
as individuals attempt to use new software to make their written work
more interesting and reader-friendly.
Document processing is not the only field where technology has
reshaped occupation profiles. Innovation and technology are
transforming production in a variety of industries. The way people
live, reproduce, grow food, work, and interact with each other are all
changing with technological advancements. As detailed by Katz (1999),
better access to cheap and fast computers was already revolutionising
production processes in the last quarter of the 20th century. But, the
changes that are happening at present are not limited to computerisation
that makes production processes easy. Scientific breakthroughs in
a broad spectrum of fields, including genetics, artificial intelligence,
nanotechnology, and 3D printing, are feeding into innovations in raw
materials, new forms of energy, and fresh ways of production.
Implications for the Labour Market
These trends are shifting the nature and the organisation of the labour
market in a variety of ways. First, technological change is making some
jobs outdated. For instance, bank tellers are being replaced by automatic
teller machines (ATMs), which are able to do most functions carried out
18
Where have all the
Typists Gone?
Technology and
Changing Job Profiles
in Sri Lanka
by tellers. Second, technology is creating new jobs. Although the bank
tellers are getting replaced by machines, different types of workers are
needed to maintain the ATM machines and to write software for them.
Third, technology is also changing the nature of jobs. For example, a
couple of decades ago, a motor car mechanic was considered to be
a low-skilled worker, who could learn the necessary skills on the job.
But today, computers are needed to detect the defects in cars that are
equipped with many electronic components. As such, unlike earlier, now
vehicle mechanics need to have computer skills to fix cars.
According to a survey conducted for the 2017 ‘Future of Jobs in India – A
2022 Perspective’ report by Ernst and Young, the nature of jobs in India
and the skills needed to do those jobs will be very different in 2022,
compared to present day jobs. According to this survey, 9 per cent of
the jobs in India in 2022 will be jobs that are not in existence today,
37 per cent of the jobs in 2022 will be radically changed, requiring a
different set of skills, and only about 54 per cent of the jobs will remain
unchanged. Such rapid changes to occupation skill profiles are making it
difficult to fill vacancies.
Sri Lanka’s Reality
In 2013, Frey and Osborne, in their research on the ‘The Future of
Employment: How Susceptible are Jobs to Computerisation?’ developed
a model to assess job disruptions due to computerisation. In that, they
show that, 47 percent of the jobs in the US are at risk of becoming
obsolete relatively soon. They make their estimates by developing
a method to assign a probability of computerisation to 702 detailed
occupations in the US in 2013. By matching the detailed
occupation codes in the US to those in Sri Lanka, it is possible to
assign probabilities of computerisation to jobs in Sri Lanka. The
authors were able to assign probabilities of computerisation to
231 occupations, resulting in 3,602,169 workers (at the 4-digit
level of the International Classification of Occupations).

According to the authors’ estimates, of the 3,602,169 workers to

whom probabilities were assigned, 70.25 per cent (or 2,530,581
workers) were doing jobs that have more than a 70 per cent
chance of getting outdated – meaning those jobs are potentially
getting outdated with technological development. However,
the time taken to replace these jobs will depend on the speed
of technological adoption by Sri Lanka. Even if the level of
computerisation of jobs in Sri Lanka will not happen as fast as it is
happening in the US, the above statistics give a fairly good picture
of the trends in occupation skill profiles.As the study shows, on
average, the job categories that are less likely to be computerised
require high levels of skill, such as ‘Managers, Senior Officials,
and Legislators’ and ‘Professionals’ (see figure) and the jobs
that are more likely to get automated require low levels of skill.
Thus, while technology races ahead, low-skilled workers, such as
typists, will be more impacted and will have to face this hard fact
of job transformations and job reallocations, in the coming years.

If there are no jobs for typists, what should the youth seeking
low-skilled office jobs train for? At the rate technology is changing
job profiles, this is a hard question to answer in time to come. The
traditional methods of planning, reforming education, and training in Sri
Lanka will not be able keep up with changes that are taking place in the
labour market. The organisation and the governance of the education
system will need to be modified in the long run, so it is able to adjust
to changing times. Further, given the rate at which skill demands are
changing in the labour market, even children who are best prepared for
the labour market will have to upgrade their skills from time to time.
The education system will need to take this into account and offer
opportunities for lifelong learning. Also, since rule-based tasks are being
taken over by computers, the jobs that are left for humans will involve
complex tasks such problem solving, critical thinking, decision making,
and creativity. The education systems must be revised to harness such
skills.
(Above Skill Levels are based on the nature of work performed in an
occupation in relation to the tasks and duties defined by International
Standard Classification of Occupations – ISCO 08.)

Change in Employment due to computerisation - Change in Employment due to Computerisation –

High skilled workers (No.) Low skilled workers (No.)
400000 800000

350000 18,978 700000 149,568

29,024 17,708
27,432
300000 10,164 600000 17,781
9,731
29,167
500000 56,791
250000

200000 400000
294,883 284,679
150000 300000

484,636
100000 200000
472
50000 100000 3303 1068
2840
5,426 5,291 0 27,579
0
Present Future Present Future
Science and Engineering Professionals Sales Workers
Hospitality,retail and Other services manaagers Market-oriented Skilled Agricultural WorkersHealth
Health Professionals Customer Services Clerks
Teaching Professionals Numerical and Material Recording Clerks
Chief Executives, Senior Officials and Legislators General and Keyboard Clerks
19
Greater Social By Sunimalee Madurawala

Globally, 740 million women are employed in the informal economy, with

Protection for limited access to social protection. In Sri Lanka, female labour force
participation has been stagnating at around 30% – 35% for many years.
In 2017, out of the 8.5 million females who were 15 years and above,

Sri Lankan only 3.1 million females were in the labour force, while only 2.9 million
were employed. Out of this, as many as 1.5 million women were working
in the informal sector. In this context, this year the United Nations (UN)

Women through celebrated the International Women’s Day (IWD), under the theme ‘think
equal, build smart, innovate for change’, focusing on how countries can
achieve gender equality and empower women, particularly through social

Better Jobs: protection systems, public services, and sustainable infrastructure. This
year, attention was on technology and innovation (TI) as a tool to achieve
the above-mentioned goals.

Role of Technology This blog highlights the labour market conditions that hinder social
protection coverage for women and examines how TI can help increase

and Innovation labour market access and opportunities for women.

Social Protection, Labour Markets, and

Women: Disparities and Underlying Reasons
Social protection consists of five major elements – labour markets, social
insurance, social assistance, micro and area-based schemes to protect
communities, and child protection. It includes policies and programmes
designed to reduce poverty and vulnerability, by promoting efficient labor
markets, diminishing people’s exposure to risks, and enhancing their
capacity to protect themselves against hazards and interruption/loss of
income.

There is a clear connection between labour markets, employment, and

social protection, where better labour market and employment conditions
guarantee better social protection outcomes.
20
Global statistics clearly show that women have less access to social
protection than men. They have lower coverage rates and enjoy
Investment
substantially lower benefits. For instance, worldwide, only 26.4% of
in social
working-age women are covered by contributory old-age protection, protction
compared to 31.5% of the total working-age population. In Sri Lanka too, Higher
the proportion of women above the statutory pensionable age receiving Increased levels of
tax social
an old-age or survivor’s pension, is lower than their male counterparts.
revenue protection

Women’s under-representation in the labour market is the main reason

for their lower social protection coverage. Apart from that, women’s
over-representation in informal employment further hinders their access Better
education,
to social protection. InSri Lanka females represent only 36% of the total Increased health, income
labour force while 64% of the employed females are doing informal jobs, economic security and
according to 2017 data from the Department of Census and Statistics growth stability
(DCS). Interruptions in careers, shorter working hours, engaging in
precarious work due to household responsibilities, and the gender pay
Higher
gap are some other important factors that limit labour market activities Higher levels
employability
by women thus lowering social protection coverage of females. of decent
and
employment productivity
(more formal,
Box 1: New reality of work-Patterns higher income)
A wide variety of Employment situations Source: ILO 2013
The rise of new forms of work
Growing individual expectations and diverse working conditions Overcoming cultural barriers – online job platforms with an international
The end of unified workplaces, times, and activities reach provide opportunities for women to work and earn in countries
The emergence of multifaceted and discontinuous career paths where cultural barriers or rules make it difficult for them to work in the
Increasing interconnections between work and private life
formal economy.
The end of static and perdicatable labour markets
Fading boundaries between national labour markets
TI to formalise the informal sector - TI can be used as an agent to
empower the informal sector, by creating scalable platforms that
provide informal sector workers with more secure income, employment
Source: World Employment confedeation-Europe 2016
benefits, and social protection. With the expansion of smartphone usage
and internet access across the world, there are many initiatives taking
Opportunities for Greater Access to Labour place to capture the informal sector’s workers into the formal system.
Markets: What is the Role of TI? One such interesting initiative in Sri Lanka is ‘Tea Integrated Payment
Thanks to TI, new patterns and trends have emerged within labour System’ (TIPS). A ‘Smart Tea Card’ is introduced which can be used as a
markets, (Box 1) overriding traditional structures and practices TI can payment card as well as a procurement card for tea factories and green
leverage and facilitate the process of creating better and more jobs and tea leaves suppliers. Through this card, the factory can electronically
accessing them. New technologies allow for more flexible workplaces, keep a track of weight of green tea leaves supplied by each supplier and
more connectivity, and opportunities for digital work through home make payments to the suppliers via electronic remittances. The ease of
offices. As such, the definition of ‘the workplace’ is changing. It expands tracking and recording earnings and other transactions has made it easy
beyond physical work premises to include anywhere the worker goes for them to access the benefits of a formal labour market such as social
in the performance of their duties. These new patterns and trends are protection coverage and access to bank loans.
paving new avenues and opportunities for women to overcome the
traditional barriers they face when accessing labour markets. In this
context, it is crucial to find ways in which technology and innovation
can improve women’s access to the labour markets and better social
protection thus accelerating the progress for greater gender equality.
Technology
Flexibility and choice - TI gives more flexibility and choice in deciding and
Innovation
where, when, and how to work. This is beneficial to women as it boosts
their employment rates. It is no surprise that countries which have
highest shares of women working from home also have the highest More
maternal employment rates. Also, gender pay gaps tend to be lower in Job
Opportunities
industries where working arrangements are more flexible. As mentioned
before, this leads to greater social protection.

More time for formal jobs – TI can be used to automate household work,
which is still the responsibility of primarily women in most societies. Greater Social
This would release their current dual burden and allow them to use Protection
their skills in the formal labour market, according to the World Economic Coverage
Forum. This would give them a chance to earn means of social protection
through work.

21
 Managing Sri Lanka – China
Economic Relations:
BRI, Debt, and Diplomacy

22
By Dushni Weerakoon
China holds approximately 9% of Sri Lanka’s total outstanding debt as of
2017, and 14% amongst bilateral lenders – equivalent to the same share
held by neighbouring India. Despite this, Sri Lanka’s engagement with
China has become synonymous globally with the Asian giant’s so-called
‘debt diplomacy’ – an euphemism for debt entrapment.
As Sri Lanka, like many other developing countries, escalates its
engagement with China’s ambitious Belt and Road Initiative (BRI), the
question of debt entrapment requires a more rigorous review. A decade
on from the Hambantota Port project’s kick off – a China-funded venture
that is illustrated globally to support the debt entrapment hypothesis –
when Sri Lanka is grappling with a worsening foreign debt overhang,
seems a propitious time to examine some of the numbers.
From a debut USD 500 million international sovereign bond (ISB) issuer
in 2007, Sri Lanka has gone on to amass USD 15.3 billion during 2007-
2018 from subsequent ISB issues and foreign currency term financing
facilities (FTFFs). In the same period, Sri Lanka tapped China for a total
of USD 9.2 billion as development loans, and an additional USD 1 billion
as a FTFF in 2018. Not surprisingly, ISBs and FTFFs together account for
33% of Sri Lanka’s outstanding foreign debt in 2017, against a 9% share
held by China.
Criticism of Chinese loan disbursements have focused not only on the
volume of funds, but also on the terms. Indeed, the Hambantota Port
saga centres on this theme – funding for phase 1 of the project (USD
307 million), costing Sri Lanka a fixed rate of 6.3%, when globally, rates
were declining rapidly following the global financial crisis.
But when considering the total USD 9.2 billion Chinese development
loans to Sri Lanka, 61% has been obtained on concessional terms,
according to data available from the Department of External Resources.
Concessional terms on Chinese loans are typically fixed rates at 2%,
with other fees of 0.5% and maturity periods of 15-20 years. The terms
compare less favourably to Sri Lanka’s other major bilateral donors –
India, but most specifically, Japan. However, in comparison to raising
ISBs or FTFFs, tapping China can be more price advantageous, with
possibly more flexibility on loan rescheduling if required.
If only 40% of loans from China has been obtained on commercial
terms, they account for only 20% of the country’s large and rising non-
concessional share of foreign debt (at 55% of total outstanding debt
in 2017). The vast bulk (80%) is made up of ISBs, FTFFs, and foreign
holdings of Treasury bills and bonds. This shift in composition has been
the main driver of Sri Lanka’s rising debt service ratios, where Chinese
development loans have played a very secondary role.
Thus, Chinese loans are clearly not the primary cause of Sri Lanka’s debt
imbroglio. But, they have contributed to, and possibly aggravated, the
problem. Loans from China are attractive to governments for multiple
reasons; they are free of conditions and lengthy negotiating processes,
and provide access to large volumes more quickly, to be disbursed
according to presumed needs. In the event, they also carry heavy risks in
the presence of poor analysis of investment projects, incentive problems,
and interest group influenced investment choices.
With much of Chinese development loans plugged into infrastructure
projects with relatively low financial returns over the long term, and
policy inaction to deal with declining export competitiveness, Sri Lanka
turned to ISBs for reserves accumulation – at times spending large
chunks defending the currency against all odds – and debt servicing. As
a result, the returns on ISB/FTFF are likely to be considerably lower than
their borrowing costs. The more prudent course when simultaneously
issuing long term bonds and buying reserves with ISBs, is to accumulate
resources to be used in periods of higher borrowing costs. Under the
circumstances, net of debt settlements, Sri Lanka’s external debt
exposure keeps growing.
The risks from the exposure to a large external debt stock are multiplying
as the favourable external financial conditions under which Sri Lanka
borrowed excessively starts to unwind.To a large extent, these pressures
will also dictate future engagements with China. A shift is already taking
place, as Sri Lanka increasingly taps China for FTFFs. With narrow
financing options for low middle income countries, there is much to be
gained from active engagement with the BRI. But, the risks too must
be better managed. Safeguards on project appraisal and selection, and
strong national debt management practices are essential for countries
like Sri Lanka to safely navigate the new financing landscape.
23
Counting
the Cost:
Terrorism and
its Impact on
the Sri Lankan
Economy
By Dushni Weerakoon
Terrorism is not an obvious subject for economic analysis. The greatest
cost comes in the form of lives lost and injured. However, terror attacks
also aim to disrupt economic life, and how far they succeed needs to
be assessed and evaluated.
The immediate economic consequences of Sri Lanka’s brutal Easter
Sunday terror attacks are obvious. The damage to tourism is the most
apparent; investments decisions might be delayed. However, as a
country that had withstood more than three decades of terror prior to
May 2009 and an economy that had shown resilient growth averaging
5% per annum in that period, Sri Lanka is certainly not a novice in
managing the expected economic fallout.
The economic impact of a serious breach of security depends on
whether it is perceived as an isolated incident or an endemic threat.
A swift and efficient response to bring the security situation under
immediate control and restore ‘normalcy’ helps establish the former;
confusion and disarray only reinforce the latter and delays an economic
recovery.
24
In either event, what is clear is that the Sri Lankan economy is unlikely
to emerge unscathed. Tourists have become extremely cautious once
again; arrivals are estimated to have plunged by 70% in the immediate
aftermath. In the next two months, the drop is expected to be 50%.
Mirroring the plunge in tourist arrivals, cancellation of flight bookings
was at over 80%, whilst new bookings too have fallen away. As tourists
switch to other ‘safer’ destinations, luring them to return will require
concerted efforts to tighten security, re-brand, and perhaps, re-price.
The opportunity cost for the industry of not being able to leverage
on the Lonely Planet’s ‘top country for travel in 2019’ ranking will be
considerable, with the long term consequences yet to be determined.
The reaction of foreign investors will be equally important. They will
become more cautious and delay investment decisions until risks are
reassessed.
During its decades-long conflict, Sri Lanka suffered from not being
able to move beyond ‘fly-by-night’ investors, owing to risk perceptions.
To avoid the same pitfalls, the country must act swiftly to restore
confidence on the security front, and reassure investors – already
unsettled by the October 2018 political upheavals and the prospects of
electioneering ahead in 2019 – of continued policy stability.
In the long term, the economic impacts of Sri Lanka’s Easter Sunday
terror attacks are likely to be relatively limited. But, there is no
gainsaying that these short-term disruptions can take a substantially
heavier toll on the economy. Not only will the plunge in tourists curtail
demand for local goods and services, but domestic consumers too
are apt to postpone their consumption. At the same time, costs for
businesses are set to rise, as the economic cost of new security
measures gets imputed. Aside from direct costs, the indirect costs
arising from a loss of consumer and business confidence can never
be measured accurately. As Sri Lanka’s successive governments
discovered over three decades of conflict, concerns about the economic
outlook wax and wane with each terror attack.
Loss of foreign tourism revenue and investments will hit Sri Lanka in
its most vulnerable spot – i.e., foreign exchange reserves. With nearly
90% of Sri Lanka’s sizeable temporary workers still heading to the
Middle East – with the Eastern Province accounting for the second
highest share (17%) – remittance earnings may also see a dip. Whilst
a fiscal stimulus as a counter measure can generate quicker results,
Sri Lanka’s climbing public-debt burden, at 83% of GDP in 2018, does
not make this the easy option. Understandably perhaps, efforts have
fallen on monetary policy interventions to ease the flow of credit to
the economy and stimulate growth. This reinforces recent attempts to
roll out credit under various schemes announced in Budget proposals,
some of it subsidised by the government.
But, monetary authorities must also be wary of encouraging excessive
lending. Sri Lanka’s fiscal financing needs can be expected to widen
from the adverse impacts on the economy of the terror attacks, further
escalating domestic financing of the deficit from the already high 4%
of GDP announced in the Budget. Together, these trends can destabilise
macroeconomic stability without producing much by way of sustained
growth. Indeed, the country has all too often seen the economy ride
high on a wave of credit, only to come crashing down no sooner, in
familiar boom-bust episodes.
Sri Lanka is already a regional economic laggard in recording a
sluggish pace of growth, and a highly indebted country facing
unprecedented levels of foreign debt settlements over the next
few years. Its economic fortunes have also come to be intimately
intertwined with competing regional and global geo-political interests.
In this volatile mix, the country is also gearing up to face decisive
elections around the corner. Under the circumstances, there does not
appear to be any quick fixes that will assure a strong and sustained
economic rebound. In all, it suggests that coaxing Sri Lanka’s
beleaguered economy to health in the face of upcoming elections, and
a renewed threat of violence from terrorism will require patience and a
steady hand.
25
 Tourism vs.
Remittances: This blog links the Easter Sunday terrorist blasts to border control and

Impact of Easter foreign exchange earnings for tourism and remittances.

Remittances
Attacks on Tourism and remittances are two of the top contributors to foreign
exchange earnings to Sri Lanka. In 2018, remittances were the key

Sri Lanka’s Foreign

foreign exchange earner, bringing home over USD 7 billion, which
amounted to 7.9% of GDP. In second place was export earnings from
textiles and garments, followed by tourism in third place, accounting for

Exchange Earnings
over USD 4 billion in foreign exchange earnings.

As seen in Figure 1, remittances had stabilised in recent years, while

2018 recorded the second consecutive year of negative growth
in remittances. Reasons for the decline in remittances include the
prevailing geopolitical uncertainties of oil price fluctuations and the
By Bilesha Weeraratne sluggish global economic growth in the Middle East, the region hosting

Figure 1: Top Three Foreign Exchange Earners in Sri Lanka 2009-2018

Sri Lanka was a few days short of celebrating a decade of peace
8000
since the end of the 30-year old separatist conflict, when a series
7000
of horrific attacks in three churches and three tourist hotels claimed
6000
more than 250 lives and injured another 500 or more innocent people.
5000
The terrorists struck at a time when the country was too complacent
4000
on national security, and the border control measures were lax. The
3000
scheduled on-arrival visa scheme hoped to boost the tourism industry,
and allow it to capitalise on Lonely Planet identifying Sri Lanka as the 2000

top country to travel to in 2019. At the same time, in terms of emigration, 1000
the concentration of Sri Lankan migrants in Middle East (ME) and the 0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
growing significance of Sri Lanka’s Eastern Province as a sending region
were hardly noticed when international remittances dominated foreign Rimittances Garments Tourism
Source: CBSL,2018
exchange earnings.

26
the bulk of the temporary migrant workers from Sri Lanka, decline
in departures for foreign employment due to improvements in the
domestic labour market opportunities, and government regulatory
efforts to curb migration for specific occupations and skills categories.

Tourism
At the same time, earnings from tourism increased by 11.6% in 2018. 17 % 18 %
This growth in tourism income was fostered by the highest ever growth of Sri Lanka’s households in
in annual tourist arrivals, which recorded a 10.3% increase to reach annual departures Batticaloa District
2.3 billion arrivals in 2018. Many factors, such as endorsements and from Eastern have a migrant
accolades from reputed international tourism organisations, aggressive Province overseas.
promotion campaigns, increase in investment in the tourism industry,
relatively free movement across the border, and better connectivity
through air and sea routes, contributed to this impressive performance
in Sri Lanka’s tourism industry. The sector was poised to grow further,
reaching out to the remaining untapped segments of the global tourism
market.

Impact on Foreign Exchange Earnings

The locations of the attacks on Easter Sunday are eerily connected
to foreign exchange earnings. The blasts at the three tourist hotels in
Colombo killed both local and foreign patrons; these were prominent,
luxury hotels, frequented by the wealthy travelers to Sri Lanka.
Although bombs went off only in three hotels, the entire tourism
industry was dealt a severe blow, as ‘more than any other economic
activity, the success or failure of a tourism destination depends on
being able to provide a safe and secure environment for visitors’.

The Easter attacks severely compromised the promise of the safety of

tourists. Despite the remarkable resilience of the sector, international
support, and various proposed government initiatives, such as a relief
package, the prospects for the tourism industry remain bleak in the
short run.

Ironically, the immediate prospects for remittances are more

favourable, as these are a common source of transfers, which
are well-targeted and speedily-disbursed, to enable smoothing of
consumption during times of financial difficulty. In addition to the cost
of sudden funerals and treatment for the injured, the aftermath of
attacks has left many areas with little civilian movement and minimal
economic activity. As such, similar to Sri Lanka’s experience in surge
of remittances following the Boxing Day Tsunami in 2004, (though not
in same scale), extra remittances are likely to flow in, to support the
kith and kin of Sri Lankan-origin migrants, who were affected by the
tragedy.
Specifically, two of the targeted churches were in areas known to be
home to many migrants and remittance receipts. Zion Church is in
Batticaloa, in the Eastern Province, which accounted of 17 % of annual
departures from Sri Lanka in 2017. Forthcoming research based on
latest (2016) micro data from the Household Income and Expenditure
Survey shows that Batticaloa disctrict has the highest proportion
of households with international migrants. For example, 17.78%
households in Batticaloa have a migrant overseas, while 21% of
households in the district receives international remittances. Similarly,
the attack in Katuwapitiya is not too far from the area known as
‘Little Italy’ in Wennappuwa, named due to the resemblance to Italian
architecture, financed with remittances originating from Italy.
88 % 21%
of migrant workers of households in
from Sri Lanka go to Batticaloa District receive
the Middle East region. international remittances.
Short and Medium Term
As such, taking into account the locations immediately affected by the
devastation and its ripple effects, a short to medium term impact on
foreign exchange earnings is likely to be experienced in Sri Lanka. The
tourism industry, despite once being well-positioned to continue its
upward trend in foreign exchange earnings, is now likely to experience
a temporary downfall, while international remittances, which was
experiencing an incipient downward trend, is likely to experience a
temporary upturn in the aftermath of these attacks. If the security
situation improves, the rebuilding efforts would help the tourism sector
to pick up in the medium term. On the contrary, regardless of the change
in security context, migration to and from Sri Lanka is likely to undergo
greater scrutiny.
In the future inward migrants’ activities would be closely monitored to
limit their activities to those authorised under the respective visas. At
the same time, appropriate measures ought to be introduced to address
the growing concern of unfavourable social remittances in the form of
Muslim extremism originating from ME region, fueling global terrorism
in Sri Lanka. As such, in the medium term, the elevated scrutiny of out
migration from Eastern province and to the ME in general are likely to
resulting in a decline in departures and associated remittances, resulting
in a decline in remittances.

27
By Bilesha Weeraratne

The coordinated blasts on Easter Sunday of 2019 in Sri Lanka claimed

The Evil Nexus

more than 250 lives and left at least another 400 injured. Deemed as
one of the deadliest terrorist-acts the world has ever witnessed, the
attacks targeted Catholic devotees in multiple churches as well as both

Between
foreign and local tourists in three major hotels in Colombo. As the world
watched on in horror at the tragedy unfolding in Sri Lanka, the first
reaction among many were whether these attackers were supported by

Migration and
an international group.

Terrorism does not bring new fear to Sri Lankans. But, the absence of

Terrorism:
terrorism for nearly 10 years was a luxury that often went unnoticed in
Sri Lanka, until recently. The combination of fear, haunting memories,
and the knowledge of how devasting the implications can be over

Implications for
decades to come, brings home the irrefutable tragedy of today’s
unfolding events. It cannot be adequately expressed in words. Moreover,
this is a new brand of terrorism which transcends geographical borders.

In this, migration in and out of countries play a critical role. Mobility

across countries enables many migrants and their families to achieve Border
Control in
a better quality of life. Nevertheless, this virtue of migration can easily
be transformed into a dangerous nexus when used as a channel for
unfavourable activities such as terrorism.

This blog sheds light on some of the resultant policy developments

that will need urgent attention in response to extremist terrorist
attacks in Sri Lanka from a migration point of view, with the aim to
Sri Lanka
influence institutional changes in border control in Sri Lanka, to counter
international terrorism.

International Elements and Migration of

Terrorism
The unravelling investigations into the Easter Sunday attacks involve
many international elements. On one level, the extent of coordination
and the quality of attacks appear to indicate that a local group could
not have acted alone and ‘there must be a wider international network
behind it’. Reinforcing this theory, international terrorism experts have
argued that these home grown attackers would have received expertise,
training, funds as well as raw materials from abroad, to carry out these
catastrophic attacks.
Most reports on the investigations point to the involvement and
motivation by an international terrorist group. They also point to both
inward and outward migration of terrorism to and from Sri Lanka,
respectively, that have taken place over the years to culminate in these
attacks. Reports in 2016 appear to suggest that about 32 Sri Lankans
(including those connected in the Easter Sunday attacks) have undergone
terrorism training overseas for months. Not surprisingly perhaps, foreign
nationals are among those arrested as suspects, including those who
are alleged to have assisted in the manufacture of bombs used in the
attacks. Meanwhile, an international terrorist group is reported to have
claimed responsibility for the attacks.
How Migration and Remittances
Contribute to International Terrorism
In 2017, there was a total of 1,439,572 departures of Sri Lankans, while
the corresponding arrivals were 1,481,368. Among these statistics,
some are repeat travelers, while 212,162 left for foreign employment. In
addition to migration for employment, other common categories include
students, medical travelers, family unification, and tourists. Except for
those departing for foreign employment via formal channels of the Sri
Lanka Bureau of Foreign Employment (SLBFE), little is known about other
departures, outside basic travel information, self-reported by traveler. As
such, leaving Sri Lanka to join or train for terrorism does not appear to
be a difficult feat. Similarly, Sri Lanka’s focus on immigrants is limited to
the archaic Immigration and Emigration Act of 1948, and lacks a policy,
mechanism, or a regulatory body to oversee immigrants’ activities once
they have arrived. For instance, while foreign nationals are permitted
to be employed under very stringent circumstances in Sri Lanka, i.e. in
investments projects approved by the Board of Investments (BoI), some
are alleged to have been directly involved in manufacturing bombs for
the attacks, for a monthly salary. Questions are inevitably being raised
about how the attackers accumulated a large amount of funds to execute
an attack of such magnitude.
The somewhat complicated nature of financial remittance routed to
Sri Lanka via convoluted paths, which makes tracking down the exact
location of the origin and final destination of remittances tedious, needs
to be analysed to ensure that international terrorist organisations are not
able to move funds freely into the country to fund local terror groups.
Together, these somewhat connected yet disjointed pieces when taken
together, should not portray a picture of Sri Lanka as a magnet for
international terrorists to hone in their activities.
Migration Control
Other countries that have experienced international terrorism have
adopted detailed practices of checking mobility of individuals.
Specifically, in the wake of 9/11, many countries developed new
institutions and regulations for the main purpose of controlling migration
flows and used them as counterterrorism methods.

28
For instance, in 2003, the US dissolved its existing Immigration and
Naturalization Service, and established a broader cabinet agency,
Department of Homeland Security, encompassing operations and
enforcement of activities related to customs, border protection,
citizenship and immigration services. Additionally, the US approach,
rightly or wrongly, was that an average immigrant was viewed as
guilty until proven innocent in many ways. Moreover, although the 9/11
Commission found no definitive evidence that informal remittance
channels financed activities of 9/11 attackers, the inference was
sufficient for many European and Asian countries to aim at regulating
these remittance channels. Similarly, Australia, maintains several records
to monitor travelers, such as Advance Passenger Processing reporting,
and a Movement Alert List.
Call for Change
Sri Lanka is a poster case for having eradicated home-grown terrorism.
Nevertheless, the international influence on the Easter Sunday attacks
calls for Sri Lankan expertise on counter terrorism to be complemented
with international support, mainly in areas of border control, to ensure
that inward and outward migration to and from Sri Lanka does not
facilitate the island to become a breeding ground for international
terrorism.
Ironically, the time is opportune to integrate such changes to tighten
border control in Sri Lanka, as both national policies on migration and
immigration are currently on the drawing boards. Specifically, the
National Migration Policy of 2009 is currently being revised, while the
very first immigration policy is being drafted and the Immigration and
Emigration Control Act is being revised.
As such, it is important that new infrastructure, institutional structures,
methods, and capacities related to the regulation of inward and outward
migration and remittances, capable of counteracting international
terrorism are integrated into upcoming national migration and
immigration policies. Ideally, Sri Lanka ought to channel some of the
generous offers for support and collaboration by developed nations,
into the above-mentioned areas As a priority in this regard, Sri Lanka
should reconsider the disjointed nature of its immigration and emigration
policies. Especially, in an era where immigration is emerging as
important as emigration, it is imperative that the two facets of migration
are considered under one umbrella. To this effect, an institutional
structure needs to be introduced to holistically view migration and
immigration, rather than each component in isolation.
Other changes to consider include the expansion of the migration policy
to incorporate all types of out migration (beyond labour migration).
Such coverage of other types of migration would tighten the loopholes
currently exploited for migration for terrorism. Similarly, national security
concerns ought to be addressed in both migration and immigration policy
frameworks.
To facilitate all these efforts, Sri Lanka needs modern methods of
data collection. It must also collect better data on distribution of
inward remittances in its country of origin and disbursement within
Sri Lanka, and expand this to cover distribution of regions of origin of
outward remittances from Sri Lanka and their countries of destination.
Culminating these efforts, the country needs to go beyond data
collection, and improve capacity and resources to adopt sophisticated
data analysis methods and tools (i.e. big data and real time data analysis
of migration and remittances), to effectively combat international
terrorism.
29
 Kamal Mala
Employed for a Employed for a
short-term in long-term in Dubai
Dubai

Transfers his salary Transfers part of her salary

to his account to her mother’s account.

Transfers funds to
her savings account

Balance of Payments - Standard Presentation

under BPM6 Format

Tipping the Balance: By Bilesha Weeraratne

Worker remittances constitute an important component in the Balance

Are Worker Remittances of Payments (BoP) accounts in Sri Lanka. In 2017, foreign exchange
earnings from worker remittances stood at USD 7.2 billion, well ahead of
other major foreign exchange earners, such as apparel (USD 5 billion) and

to Sri Lanka Really as tourism (USD 3.9 billion). As a share of GDP, worker remittances accounted
for 8.6 %, and more interestingly, worker remittances alone covered 96%
of the trade deficit in 2017. Despite a few fluctuations, worker remittances

Large as We Think? to Sri Lanka have been growing over the years. At the same time, many
developments in Information and Communication Technology (ICT) and
Financial Technology (FinTech) have emerged to facilitate remittance
transaction. Nevertheless, whilst simplifying and making remitting
more efficient, these developments have made remittances even more
30
complicated. This blog sheds light on the possible issues involved in
reporting and recording remittances, with the view of underscoring the
possible limitations in understanding worker remittances reported in BoP
accounts.
Worker Remittances vs. Personal Transfers
As per the latest reporting format - sixth edition of the Balance of
Payments and International Investment Position Manual (BPM6),
published by the International Monetary Fund (IMF) in 2009 – the
previous terminology of “workers’ remittances” is now replaced by the
term “personal transfers”. While the BPM5 defined workers’ remittances
as current transfers by migrants who are employed and residing in
new economies, personal transfers are defined as being independent
of (a) the source of income of the sender, (b) the relationship between
the sender and receiver, and (c) the purpose for which the transfer is
made. Sri Lanka’s transition from BPM5 to BPM6 was implemented
in 2014 with the publication of the BoP statistics for 2012 and 2013
(CBSL, 2014). This means that now, personal transfers are not limited
to “personal transfers originating from migrants sending resources to
support their relatives in their economy of origin”, but could also include
transfers from the diaspora.
Nevertheless, the statistics on worker remittances reported for Sri Lanka
for 2012 under BPM5 and BPM6 are identical, except for change in their
placement. Under BMP5 worker remittances to Sri Lanka (USD 5,985)
was recorded under Receipts for Personal Transfers, under current
transfers in BoP accounts , while under the BPM6 format the same value
is recorded under secondary income, workers’ remittances. Ideally,
the value under BPM6 should have increased due to the wider scope
covering worker remittances and diaspora contributions. Nevertheless,
they may have remained unchanged for many reasons; the two most
plausible would be (a) because the numbers were not recalibrated as per
the new definition but only changed in placement, or (b) BPM5 estimates
of remittances mistakenly already included diaspora contributions. The
second reason appears more convincing, as when SLBFE departure
statistics show that labour migration from Northern and Eastern
provinces during this period was not a major component, the CBSL
(2012, p135) notes that “expansion of banking facilities in Sri Lanka,
particularly in Northern and Eastern provinces, contributed in attracting
higher remittances in 2012”.
Nuances in Transactions
Complicating things further, the Compilation Guide to BPM6 further notes
that “not all transactions channeled through Money Transfer Operators
(MTO) or commercial banks from individuals and households abroad, and
between households, represent personal transfers”. Following are three
examples, which on the surface looks like personal transfers, but as
explained below, only one is a personal transfer.
Example 1: Kamal, employed short-term in Dubai, transfers most of his
salary to his account in Sri Lanka. This should be reported as a credit in
primary income, under compensation of employees in Sri Lanka, and not
under personal transfers.
Example 2: Mala, employed long-term in Dubai, transfers part of her
salary to her mother’s account in Sri Lanka. This should be recorded as
a credit under secondary income account personal transfers—workers’
remittances.
Example 3: Mala transfers funds to her savings account in Sri Lanka. This
should be recorded under the financial account—other investment—
currency and deposits.
Practical Issues
Making matters worse, in Sri Lanka, personal transfer entries in the BoP
accounts are based on information provided by commercial banks that
received personal transfers. In most cases, the commercial banks do
not have sufficient information provided in the transaction documents
to decipher between compensation for workers (example 1), personal
transfer (example 2), and other investments (example 3). As such,
there is a high possibility for the first and third examples above to be
inadvertently compiled under personal transfers.
FinTech
Given the latest development in financial technology, one would think
that tracking remittances would have gotten easier. Unfortunately, the
capacity of technology to facilitate convoluted channeling of remittances
via so many transaction points in an instant, and the related large volume
of data generated in some sense have contributed to making it tedious
to track down the exact location of the origin and final destination
of remittances. As such, industry experts are of the view that a large
amount of estimation is involved in identifying the exact origin of
remittances.
Moreover, the growing popularity of the ‘gig economy’, the availability of
various platforms that offer opportunities for virtual labour migration, and
their marriage with developments in FinTech increasingly blur the lines
between payments by physical migrants and virtual migrants.
Bottom-line Issues
In this context, even though Sri Lanka is used to associating remittances
with temporary migrant workers, as explained above, personal transfers
may also include transfers by more permanent migrants who have
settled down in countries of destination. Moreover, given the latest
developments in global employment and various sub headings of BoP
that capture foreign exchange transfers by persons of Sri Lankan origin,
the time is right for Sri Lanka to shift focus from temporary migrant
workers and remittances to the broader concepts of persons of Sri
Lankan origin and their foreign exchange earnings.
Unrelenting Budget Proposals
Perhaps the upcoming budget could be an ideal stepping stone to reflect
this change in focus, by offering incentives for transfers by persons of Sri
Lankan origin. Nevertheless, it is important to bear in mind that over the
years, there have been several budget proposals to incentivise temporary
migrant workers and their remittances, but none of them materialised
to the stage of implementation. For example, a budget proposal in
2015 aimed at providing a duty free vehicle permit for migrant workers
remitting foreign exchange and proposals for 2016 considered a pension
scheme for Sri Lankan migrant workers. By contrast, proposals for 2018
did not have any reference to migrants and remittances. Nevertheless,
in the spirit of perseverance, the following are a few suggestions to
reposition the policy focus from remittances to transfers by persons of
Sri Lankan origin in the budget proposals for 2019:
n Offer a special (higher) interest rate for fixed deposits opened using
transfers from persons of Sri Lankan origin (similar to the existing
scheme of special rates of interest offered to senior citizens), when
supporting documents can prove foreign employment, source of
funds, and other pertinent information.
n Consider regular foreign exchange income in excess of 12 months,
instead of accumulated savings, together with adequate supporting
documents, as collateral for financial activities.
31
The Great British
Breakoff: Making Sense
of the Brexit Debacle
By Kithmina Hewage 2019 and 31 December 2020 for both parties to negotiate a trade
agreement and allow businesses to adjust more smoothly. However, the
The UK economy could shrink by 2.5 to 4 percent in the long run after UK Parliament overwhelmingly rejected the agreement by a remarkable
leaving the European Union (EU), and that’s a best-case scenario. 432 votes to 202. This represented the biggest margin of defeat by a
The reality, however, could be starker, as the UK stumbles from one British Prime Minister in modern history.
political-economic crisis to another, since its Brexit referendum in 2016.
Prime Minister, Theresa May has failed to garner the required support Why do so many oppose the agreement?
in parliament for a proposed deal, leaving the country on the verge of The biggest point of contention is regarding what is commonly referred
a no-deal Brexit. The situation has been complicated even further with to as the “Irish Backstop”. Neither the EU nor the UK want to create a
the passage of several votes in the parliament in January. This article physical border barrier between Northern Ireland (part of the UK) and the
will discuss some key questions regarding the current state of Brexit, Republic of Ireland (an independent nation which is a member of the EU)
potential outcomes, and their respective impacts on Sri Lanka. due to political and economic reasons. Politically, a physical border may
jeopardize the Irish Peace process while from an economic standpoint
What happened since the Brexit both countries are heavily interdependent on each other.
Referendum? Considering this, both parties agreed to establish a backstop, which
Since the Brexit Referendum in 2016, the UK formally invoked Article 50
commits the entire UK to the EU Customs Union, while Northern Ireland
of the Treaty on the EU and set a withdrawal date for 29 March 2019.
is also bound by many rules of the single market, until a long-term
During this time, the UK has also been in negotiations with the other 26
trade pact is agreed. This could potentially mean that the UK is bound
EU nations to agree on a “divorce deal” – an agreement that lays out the
by EU rules without having a voice in shaping them as a EU member,
terms of exit between the UK and EU.
indefinitely. This proposal, faced severe opposition from hard-line Brexit
supporters. Since rejecting this proposal, the parliament has requested
Contrary to what was promised by pro-Brexit campaigners during
the Prime Minister to renegotiate the backstop with the EU, yet the EU
the lead up to the referendum, the EU has taken a tough stance in
has also stated that they are not willing to compromise any further on
negotiating with the UK. While the EU would prefer that the UK remain in
the matter.
the EU, it is more concerned by other countries potentially leaving in the
future. Thus, it is intent on keeping the union strong amidst Brexit, while
Meanwhile, pro-Remainers believe that the agreement does not provide
demonstrating to its member nations with inclinations to leave that they
adequate safeguards to UK businesses that will be affected after Brexit.
will be worse off outside its membership.
In a post-Brexit world, British exports to the EU will face tariffs, making
them less competitive. Meanwhile, restrictions on the movement of
In November 2018, the UK and the EU agreed on a withdrawal
persons after Brexit has also led to several financial companies moving
agreement and among a plethora of issues, some of the key concerns
their offices from the UK to mainland Europe. For instance, US banks
revolved around how much the UK will have to pay for withdrawing from
Goldman Sachs, JP Morgan, Morgan Stanley, and Citigroup have
the partnership (approximately £39 billion), the status of UK citizens
already moved $283 billion worth of balance-sheet assets to Frankfurt
currently living in the EU and vice versa, and the avoidance of a physical
while HSBC – Europe’s biggest bank – is also moving its European
border between Northern Ireland and the Republic of Ireland.
Headquarters from London to Paris.
The agreement also established a transition period between 29 March
32
What happens next? BREXIT
As noted earlier, the critical deadline is looming. While the Prime Minister Timeline
attempts to renegotiate a deal with the EU, uncertainty reigns and several
potential outcomes exist.

(a) No Deal

A no-deal Brexit is the ultimate nightmare scenario for all parties concerned
as Britain will move out of the EU overnight with no safeguards or transition
periods. Moreover, Britain will also lose any leverage it currently possesses June Brexit
with the EU in order to negotiate a favourable trade deal separately. Oxford 23, 2016 Referendum
Economics forecasts that a No-deal Brexit will knock 2 percent off the
UK economy by the end of 2020. Meanwhile the IMF predicts a long-term
negative impact of close to 7 percent of GDP growth in the absence of a
deal or a negotiated FTA. Similarly, the Bank of England controversially
estimated that the UK economy would contract by 9.3 percent in 15 years
of a No-deal Brexit. Cognizant of these impacts, the parliament has voted
in favour of avoiding a no-deal Brexit. However, given recent developments,
the likelihood of this has increased even further and the British government March
Marchh Article 50
has already initiated contingency plans for this outcome. 29, 2017
29, 2017 Invoked

(b) Readjusted Deal

Negotiations
Following the defeat of the deal, the UK parliament has since passed
several amendments instructing th e Prime Minister to re-open negotiations
with the EU. EU officials, on the other hand, have stated that they are
unwilling to open up the legal text for further negotiations. In the unlikely
event that negotiations reopen, May could attempt at passing an amended
deal – especially regarding the backstop. The passage of such a deal would January
J anuary UK Parliament
be a significant political victory for the Prime Minister, but is highly unlikely 16, 2019
16, 2019 defeats
given the wide spectrum of opposition that currently exists. negotiated deal

(c) A Second Referendum

If the political deadlock over an amended deal persists and the likelihood of
a No-Deal Brexit increases, the Prime Minister is likely to call for a second
referendum. While some prefer another referendum that includes the
option of remaining in the EU, others believe that it should not be.
Crucially, the European Court of Justice has already ruled that
the UK has the right to revoke Article 50 unilaterally, which Readjusted A Second
No Deal
leaves that option open as a means of last resort for the Prime Deal Referendum
Minister. That said, the Prime Minister is likely to face severe
backlash from her conservative pro-Brexit colleagues if a
second referendum was to be put forward. Given domestic rules March
M arch
h
of a referendum, the likelihood of a second referendum before 29 March is 29,, 20
29 2019
19
slim.

What does this all mean for
Sri Lanka?
The UK is the second largest destination of Sri Lankan exports (approx.
8.3% of total exports) and accounts for roughly 30 percent of exports
to the European Union. Crucially, garments and rubber products are the
biggest export from Sri Lanka to the UK (approx. 80% of exports to UK) and
they benefit from EU GSP+ concessions. This means that the outcome of
Brexit will have a direct impact on Sri Lanka’s export sector. If a No Deal
Brexit takes place, the UK will no longer fall under the EU GSP+ and Sri
Lankan exports could potentially face tariffs. That said, British authorities
have indicated that, at least in the short term, they will extend the same
preferential concessions to which they have committed. However, this
would require the UK parliament to pass the required legislature and even
minor lags in passing such legislature may have impacts on Sri Lanka.
More importantly, the negative economic impact, especially of a No Deal
UK officially
leaves the EU
Brexit, on both the UK and the EU could lead to an overall depletion
of demand for Sri Lankan exports as well. Whilst acknowledging the
importance of GSP+, however, it is important that the Sri Lankan
export sector adjust to an imminent post-GSP+ era. Sri Lanka is
projected to achieve upper-middle income status during the next 3-5
years, and upon graduating to this status, will no longer qualify for
GSP+ concessions either to the UK or the EU. Therefore, considering
the potential economic shocks that may arise out of Brexit and the
loss of GSP+ in the near future, Sri Lanka is best served by urgently
looking at diversifying its export markets whilst also improving
its natural competitiveness in order to insulate itself from specific
external shocks such as Brexit.
*Originally published on 14 February 2019
33
 Who, When, Where?
Improved Data and
Information for Tourism
Development in Sri Lanka

34
By Kanchana Wickramasinghe
Since the end of the conflict in 2009, Sri Lanka’s tourism sector
has seen unprecedented growth, with the number of tourist arrivals
to the island increasing annually. Tourist arrivals to Sri Lanka has
increased by more than 2.8 times during the last 10 years (2009 –
2018), while the arrivals in 2018 recorded at a level over 2.3 million.
However, Sri Lanka is yet to realise the full potential of the sector.
Meanwhile, notable developments are taking place in many tourism
sub-sectors, the country still lacks a well-planned and comprehensive
approach to maximise the economic gains the sector has to offer. One
major constraint in this regard is the dearth of necessary data and
information, which has been an obstacle to effective decision making.
As such, the data and information shortage should be addressed
without much delay, so that the industry can reach its full potential in
the future.
Existing Gaps
Comprehensive data and information can serve as a powerful tool
in strategic tourism development. Information on travel behaviors of
various categories (by age, country, education level etc.) of tourists,
demand for specific tourism products etc. can serve as powerful
indications in tourism planning. In Sri Lanka, the lack of data and
information has led to many ‘unknowns’, a gap that needs to be filled
if effective and accurate decisions are to be made. As the Sri Lanka
Tourism Strategic Plan 2017-2020 (SLTSP) highlights, notable fissures
exist in the areas of visitor segmentation, domestic tourism, and in
linking tourism sector with other economic sectors. Visitor data is not
available for niche markets such as ecotourism. There is no specific
mechanism to generate data on domestic tourism, though it is touted
as a growing segment. Due to the absence of proper data, estimates on
domestic tourism are derived in a subjective manner, and can hinder
the decision-making process.
Tourism’s real contribution to the national economy is important
to guide tourism policies. However, this is not yet clear as existing
assessments do not take into account all the aspects of economic
impacts of tourism. Statistical frameworks such as tourism accounting,
developed by the World Tourism Organization (WTO), can help to
calculate such contributions.
Tourism accounting is a satellite system of accounts that are being
developed to evaluate sectoral contributions of selected sectors with
connection to the main System of National Accounts (SNA). Tourism
accounts are intended to generate necessary information to evaluate
the true contribution of tourism sector to the national economy. Sri
Lanka is planning to develop a tourism accounting system by the end
of 2018, according to the SLTSP. However, as the SLTSP points out,
the available data is not in the standard format to be fed into tourism
accounting.
Tourism accounts can help the development of Sri Lanka’s tourism
sector in multiple ways. Tourism accounting can serve as an important
tool in tourism-policy related decision making, as it provides the true
economic value generated by tourism. Widespread data, covering
all important aspects of tourism (such as pre-departure decision
making, reservations, expenditure, travel reviews etc.), is vital in
adopting indicators to measure various aspects of tourism. Currently,
data limitations are identified as a barrier, particularly when adopting
indicators to measure the sustainability aspects of tourism.
Furthermore, tourism accounts would help to assess the current
standing of Sri Lanka tourism sector in relation to global developments
in the industry. As Sri Lanka aspires to become a dynamic and
competitive tourist destination, it needs to cater to the changing
trends in the travel industry. Particularly, having a sound knowledge
about the demand trends and traveler expectations are imperative
when making supply-related decisions. This requires information
such as travelers’ online search information, travel patterns, spending
habits, reservations, and feedback on experiences. Niche markets
should receive more attention, as those are not usually covered by
conventional data and information mechanisms.
New Developments in the Sector
To its credit, the SLTSP has identified the need for achieving a robust
data collection and analysis system, with the support of a full-time,
dedicated research unit at the Sri Lanka Tourism Development
Authority (SLTDA). The SLTDA has already taken steps to prepare an
annual statistical bulletin on the sector by collecting and compiling
information from variety of sources which has become a useful source
of information on the industry If implemented effectively, tourism
accounts will address many data related issues in the tourism sector.
However, the successful implementation of such a system requires
cooperation of many data generating entities in the tourism sector.
As such, the SLTDA needs to develop a comprehensive mechanism to
collect important data and make use of it meaningfully. Tourism entities
such as hotels and travel agencies should be encouraged to maintain
their own databases and share them with the SLTDA in a timely
manner. Creating awareness on better data management and digitising
data are important in this regard. For instance, a study undertaken by
the IPS showed that only 37 per cent of hotels maintain records on
energy and water consumption and waste generation.
In addition, the SLTSP acknowledges the importance of making the best
use of available digital data, platforms, and applications, particularly
with regard to tourism marketing. Key elements of this include website
design and development, content creation, management of social
media channels, search engine marketing, search engine optimisation,
travel apps, and online platforms such as TripAdvisor. Substantial
amounts of data are available through immigration data and e-visa
systems. This points to the importance of paying attention to new
avenues, such as big data solutions, while taking appropriate actions to
improve existing data mechanisms.
Big data is a promising way of generating vast amounts of important
information, which traditional standard databases are unable to
deliver. Advanced methods and technologies have already emerged for
generating big data. Around the world, many attempts are already being
made to utilise big data in tourism. Kayak, a travel search site, and the
Marriott Hotel chain are two such examples. However, big data cannot
be handled using traditional methods and requires both hardware and
software resources and skills. Even so, it is worthwhile to explore the
possibilities of using big data in tourism and make meaningful attempts
to use them for the development of the tourism industry.
In each of these attempts, collaborative efforts are needed, as the
industry is characterised by a variety of sub-segments and a large
number of private individual entities that generate data on a regular
basis. Efforts on these lines should be considered as a high-return,
timely investment for guiding the ongoing and future tourism
developments in Sri Lanka.
35
By Dilani Hirimuthugodage
Cinnamon is the leading spice commodity of Sri Lanka. It contributed
to approximately 54% of total spice exports and accounted for 8% of
total agriculture exports in terms of values, in 2017. During the last
decade, Sri Lanka has dominated the world market in cinnamon exports,
followed by Indonesia, China, and Vietnam. However, these countries
produce cassia in huge quantities, whereas Sri Lanka produces pure
cinnamon (Cinnamomumzeylanicum).
Even as the leader in the global market, meeting quality standards is
a major problem faced by Sri Lanka’s cinnamon exporters. The 2019
Budget proposes to make it mandatory for cinnamon exporters to obtain
certification for their products after quality control testing, at the point
of export. Those who fail the test will have 12 months to improve their
operations and bring their products up to standard. In this context,
this blog focuses on the major quality constraints faced by cinnamon
exporters in Sri Lanka and provides recommendations, based on a
recent IPS study.
cinnamon bales. Peeling requires skilled labour and the know-how
handed down from generation to generation. Proper care and attention
are important at this stage, to ensure the quality of the product.
Presently, most peelers lack knowledge and interest. Also, they are
reluctant to peel fine grades as it is time consuming. Thus, they rush to
finish work at one location and move on to another peeling shed within a
short period of time. Labour shortage in peeling creates a high demand
for peelers. Moreover, peeling is done at household premises in most
cases, with limited facilities and technology for production and storage.
Further, they use primitive techniques and tools, and do not adhere to
practices that ensure high quality and safety.
Collectors’ main requirements when buying cinnamon are the moisture
content and the appearance of cinnamon bales. Moisture content is
measured by checking the samples with their hands. Although moisture
meters are available to check these levels, collectors do not use them
due to negligence. Producers sell their cinnamon bales to any collector
who offers them the highest price. Collectors have bargaining power to
determine prices according to the grades. The quality of cinnamon bales

Quality Standards,
Although Sri Lanka remains a market leader in pure cinnamon, capturing
a market share of 90%, there are a few newcomers to the pure
cinnamon industry, such as Seychelles and Madagascar. Thus, in the
future, Sri Lanka will face stiff competition from these new entrants, and
as such, increasing the quantity and the quality of cinnamon is key to
remaining competitive in the global market. Make or Break
Sri Lanka’s main export markets for cinnamon are Mexico, USA, and
Peru, while a significant quantity is exported to Colombia, Ecuador,
Bolivia, and India. More than 90% of cinnamon is exported as cinnamon
Point of Sri Lanka’s
quills/sticks, whereas much less is exported as cinnamon bark oil and
leaf oil. Thus, maintaining the quality standards of cinnamon quills is
especially necessary to survive in the international market.
Cinnamon Industry
Product and Process Standards Relevant to
Cinnamon
Sri Lanka Standards Institute (SLSI) has specified the required standards
for Ceylon Cinnamon (SLS 81: 2010); the focus is mainly on the physical
appearance of the products. According to the specifications, there
are two main grades – “coarse” and “fine”. Fine grade is
named as ‘Alba’ and the market price is
significantly higher compared to
other grades; the coarse grades
are ‘Mexican’ and ‘Hamburg’.
These are categorised according
to the diameter of quills, number of
whole quills per kilogram, and the
occurrence of reddish-brown patches
on the surface of the quills (the extent of foxing) .

There are also international standards that are applicable for cinnamon,
such as the European Spice Association (ESA) specifications of quality
for herbs and spices, the American Spice Trade Association’s (ASTA)
cleanliness specifications, the Good Agricultural Practices (GAPs), the
Hazard Analysis and Critical Control Points (HACCP), ISO 22000:2005,
and Fair Trade.

Does Sri Lankan Cinnamon Meet Quality

Standards? is determined through collectors’ experiences. In general, one
There are several stakeholders involved in the cinnamon value chain. cinnamon bale consists of different grades of quills. Thus, deciding a
After harvesting cinnamon, peelers play a major role in preparing price of a bale is entirely up to the collector.Collectors compete amongst

36
each other. Such competition leads to the purchasing of low quality
products at a very low rate, which are then mixed with others. They also
neglect to provide hygienic storage conditions and proper transportation.
Most often, collectors prefer to sell their cinnamon to exporters who offer
them a fair price. They also require quick payment methods and prefer to
get paid in cash.
Exporters are mainly concerned with the cleanliness of cinnamon bales;
they should be free from microbial attacks. However, finding quality
products is a major challenge. This is mainly due to weak linkages
among producers and exporters. Collectors who act as middle-men
have control over the supply and they provide bales which are a mix of
several grades. Moreover, obtaining and maintaining international quality
certificates are also very costly.
Way Forward
It is crucial to conduct awareness programmes on the importance of
meeting quality standards from producer level to exporter level across
the cinnamon value chain. At the producer level, it is vital to introduce
techniques and methods to make peeling, rolling, and quilling processes
easier and provide proper training for peelers to produce quality
products. The pressing need for establishing ‘Central Processing Units’
in main growing areas has been emphasised by stakeholders in the
industry. Moreover, it is useful to modernise ‘in-house processing sheds’
to maintain the quality of the products. It is also necessary to promote
producers to adhere with GAPs. The 2019 Budget has recognised the
importance of strengthening the cinnamon training academy in Kosgoda
to train peelers and the budget has allocated funds for it.
At the collector level, a priority would be to promote sound storage and
transport systems. Towards this end, awareness should be increased
on conditions of warehouses, which should be covered and well
protected from rain, sun, and excessive heat. Moreover, Sri Lanka has
to strengthen existing mechanisms and introduce new technologies for
quality checking.
When considering the exporter level, increasing their linkages with
producers and developing appropriate methods and programmes for
processing are required. It is essential to introduce concessionary terms
or incentive schemes for exporters who wish to obtain and maintain
standard certificates, to safeguard Sri Lanka’s position as the supplier
of true cinnamon to the world. As highlighted earlier, the 2019 Budget
has taken steps towards ensuring quality of cinnamon exports. However,
more needs to done along the cinnamon value chain to ensure the
quality of cinnamon exports.
“ Exporters should receive
quality cinnamon bales. If
bales are rejected by
the exporters, we can-
not proceed with the
shipments on time. Quality
control should be focused “
at the point of collecting
cinnamon
- Cinnamon
exporters in Sri Lanka
37
Improving Quality of
By Nisha Arunatillake

Sri Lanka’s labour market has been riddled with persistent high
informality, an unchanging low female labour force participation, and

Jobs in Sri Lanka: low quality of available jobs. Enhancing exports can be a solution to
these intractable problems, according to the findings of the Exports to
Jobs – Boosting the Gains from Trade in South Asia report, a joint study
by the World Bank (WB) and the International Labour Organization (ILO).

Can Exports be the The study, using data from India, Sri Lanka, and Bangladesh shows that
boosting exports improves domestic labour markets by creating jobs,
increasing wages, and reducing informality.

Panacea? The impact of trade on employment shows that the Sri Lankan labour
market, especially young females, benefitted from export growth in
the economy. Initiatives taken by successive governments to promote
trade since late 1970s resulted in Sri Lanka’s exports of goods and
services to GDP ratio increasing, mainly in the 1990 to 2000 period.
The ratio was at its highest in 2000 (39 per cent of GDP), but it has
since declined to 22 per cent in 2017 (see graph). This decline was
due to many reasons, including loss of domestic competitiveness, an
overvalued currency, as well as external factors such as the phasing
out of the Multi-Fiber Agreement (MFA) in 2005, the ending of the
GSP-plus scheme in 2010, and the global financial crisis. Since 2010,
exports of goods and services have started picking up again, but its

38
contribution to the GDP remains low compared to its
earlier performance.
The main
The Effect of Exports on the beneficiaries
Labour Market of these
The improvement in trade has benefitted the labour
market in many ways. Employment has shifted employment
from agriculture, which provides mainly informal
employment opportunities, to the industries and opportunities
services sectors. Available evidence shows that
employment in the industry sector has doubled were those
from one million in the early 1990s to about two
million in 2006; a half of these jobs were created
hardest to
in the manufacturing sector. employ – the
The main beneficiaries of these employment young, low-
opportunities were those hardest to employ – the
young, low-skilled females. In addition to direct skilled females. In
employment created in the export sector, jobs
were also created in the non-tradable sector.
addition to direct
Many of the workers in the Export Processing Zones (EPZs) are internal employment
migrant workers. As such, many small-scale businesses have come
up close to the zone, providing food, lodging, and transport to these created in the export sector,
workers. Other firms provide support services to the manufacturing
businesses operating within the zone, such as freight forwarders and jobs were also created in
logistics providers. Available data also show that real wages have kept
pace with the export sector performance. The real wages increased in
the non-tradable sector.
the 1996 to 2000 period, when the export performance in Sri Lanka was Many of the workers in the
improving. However, along with the decline in the exports to GDP ratio
from 2000 to 2006, the real wages either stagnated or declined. This Export Processing Zones
decline was most apparent for young females.
(EPZs) are internal migrant
Nature and Scale of Exports Matter workers.
According to the Exports to Jobs report, the extent to which exports
can influence the labour market outcomes are dependent on the scale
and nature of export growth. Higher the export per worker, larger the exports also matters in determining who benefits from exports. For
benefits from export growth. example, an increase in labor-intensive exports can boost employment
creation and wages more than capital-intensive exports.
The findings show that increasing exports per worker in Sri Lanka from
USD 250 to USD 1,500 on average can increase wages from about LKR
2,000 to about LKR 14,000. The report further notes that the nature of
Facing the Challenges
One issue with relying on the export sector to create jobs has been its
volatility. This was apparent during the global financial crisis that started
Exports of goods and services (% of GDP) in 2007. During this period, the sources of employment shifted from
export-oriented sectors such as manufacturing, to domestic agriculture,
40.00
and wholesale and retail jobs. According to the Exports to Jobs report,
diversifying the export markets and the export product base can help to
36.00 reduce this volatility. Further, The employment loses during the phasing
out of the Multi-Fiber Agreement, was mainly due to the closing of
the smaller firms while the more established firms continued to grow,
32.00
making use of new opportunities such as the GSP-plus scheme (See
Sri Lanka
for e.g., Utilization of Preferential Trade Arrangements: Sri Lanka’s
28.00 Experience with the EU and US GSP Schemes,). Such examples show
that firm quality and sophistication also matters in being resilient to
24.00 changing domestic and global environment.

The Exports to Jobs report further notes that the gains from exports
20.00 can be increased through complementary policies. The study results
show that educated urban workers benefit more from higher exports.
16.00 In this light, policies to educate rural workers and improve connectivity
1990 1995 2000 2005 2010 2015 between cities and rural areas can help to extend these benefits to rural
Source:WITS - Country Profile workers.

39
Allowing Youth to Tuk-Tuk or not Tuk-Tuk:
Should Access to Three Wheeler Market in Sri Lanka
be Regulated?
By Thisali de Silva with Nisha Arunatilake
The blue, green, red, and yellow three wheelers navigating traffic or
parked along the roads waiting for customers has become a common
sight in any part of Sri Lanka. The large number of youth being
employed as three wheeler drivers has concerned policymakers,
especially given the widespread labour shortages in a wide range of
industries in the country. The government has tried to intervene in the
tuk-tuk market by attempting to impose an age restriction on three-
wheeler operators. The proponents of the age restriction cite careless
driving practices of three wheeler drivers, the increasing number of
road accidents, and road congestions caused by unruly three wheelers
as the main reasons for such a regulation. The lack of interest among
youth to look for employment in sectors with labour shortages is also
a concern. This blog attempts to clarify some myths about the three
wheeler market, while weighing in on the debate on whether the
government should impose an age restriction on three-wheel drivers.
What is the size of the tuk-tuk taxi driver
market?
One argument for regulating the three-wheeler market is its size.
40
Many newspaper articles in the past few months have made reference
to more than one million three wheelers on the road. But, careful
examination of data shows that the number of three wheelers available
for hiring is much less. It is true that the number of three-wheelers
on the roads have increased over the years. The number of registered
three wheelers has increased by 372,740 from 2012 to 2017; in
2018 this number surpassed the 1 million mark. However, not all
registered three wheelers are hired. The 2013/14 Economic Census
of the Department of Census and Statistics estimates that only 47%
of registered three wheelers are used as taxis. On this basis, it can
be estimated that there are only around half a million tuk-tuk drivers
providing a taxi service in the country – much less than commonly
assumed. This indicates that around 6% of the national labour force
are tuk-tuk taxi drivers. However, not all of them are full time three
wheeler operators. In fact, three wheeler operators are among the
top ten secondary occupations in Sri Lanka. As per labour force data,
about 12% of three wheeler drivers consider that as their secondary
occupation. This means that the number of those employed in the three
wheeler market as full-timers is less than half of the 1 million figure
that is often quoted.
Are tuk-tuk taxi opera- Age Distribution of Three Wheeler Drivers
tors mostly young?
25.0
Apart from the sheer number of
three wheelers on the roads, another

Percentage of three wheeler drivers

main concern of policymakers is that 20.0
too many youth opt to drive three
wheelers, without obtaining other
15.0
types of vocational training. However,
labour force survey data (2016 and
2013) show that the largest share of 10.0
three-wheeler drivers is found among
middle-aged (30-40 years) individuals. 5.0
Further, the share of youth operating
three wheelers have decreased from
.0
2013 to 2016 (see graph). As shown

<19

19-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70>
in the data, in 2016, the share of
individuals in the three wheeler market
increases after age 35. This increase is 2013 2016
more pronounced in 2016.
Source: Own construction using Labour Force Surveys 2013 and 2016

Who is attracted to the Average monthly earnings of low skilled workers,

tuk-tuk market? by age group and main occupation (2016)
The three wheeler market is most
attractive to those with low levels
of education. With males below 35
years of age with low skills, three
wheeler driving is in the top most
occupied jobs. Most three wheeler
drivers (75.5%) have not passed
G.C.E. Ordinary Levels and have not
obtained any sort of formal vocational
ers

r
drivers

Labou n
rers

Salesp arket
ersons

tors

Labou g
rers

arm
rers

Vegeta Crops and

owers
and

wheele

or industrial training.
s

Mason

cturin
Driver

structi
Manag

Cultiva

Crop F
Labou
Truck

nd M

ble Gr
Manufa
Three

g Con
Lorry

Why are individuals

Stall a
Shop
Heavy

Field
Paddy
Buildin

attracted to the tuk-tuk

market?
A qualitative analysis of tuk-tuk Source: Own calculations using Labour Force Survey data
operators showed that many young Note: Monthly earnings include income from secondary income sources.
school-leavers as well as middle
aged people in Sri Lanka are attracted
to the three-wheeler market due to many reasons. Young individuals
enter into this market because it yields quick profits without allocating
years on training or education. Middle-aged drivers seem to choose
this occupation after quitting other formal jobs. Some stated that
they prefer three wheeler driving mainly due to the low responsibility
involved, compared to other jobs. Also, they enjoy having time for
family commitments and not being confined to one place for large
periods of time.
Another attraction of the three wheeler market is the earnings. Three
wheeler driving was among the highest average monthly income
earning occupations – only beaten by shop managers, masons,
and heavy vehicle drivers. Further, the average monthly earnings
of workers in other occupations who operated three wheelers as a
secondary income earning source was also very high. Long term
training and experience is needed to be successful in some of these
high remuneration occupations such as masonry or heavy vehicle
driving. Meanwhile. some three wheeler drivers chose this occupation
to finance other entrepreneurial activities.
15-24 year olds 25-35 year olds
Some three-wheeler operators have tried other occupational avenues,
such as working in factories and as helpers in shops, before becoming
tuk-tuk drivers. But, those jobs were not attractive to them as they
were low paying, high stress and/or had inflexible work hours.
What are the policy implications?
The above data shows that low skilled youth are attracted to the three-
wheeler market as it provides better earnings and attractive working
conditions such as flexible hours and low stress. Many are attracted to
the three-wheeler market to supplement their incomes from their main
job or to finance other business activities. Imposing an age barrier on
entering the three-wheeler market would deny youth the opportunity
to earn an additional living. If safety and undisciplined driving is a
concern, stricter regulation for providing three-wheeler licensing that
require training in safe driving and road rules would result in reducing
three-wheeler related accidents, traffic violations, and road safety
concerns.
This analysis also indicates that better wages and better working
conditions can be helpful in attracting youth to industries experiencing
labour shortages.

41
Lowering Sri Lanka’s
NEETs: Need for Smoother
School-to-Work Transitions
By Ashani Abayasekara

The world stands on the brink of a fourth industrial revolution, where

dramatic changes in technological advancements will have profound
impacts on the future employment landscape and skill requirements. This
means that engaging in lifelong learning—be it at school or at work—to
anticipate and prepare for future labour market demands is of paramount
importance.

In this context, the presence of a large population of youth not in

education, employment, or training (NEETs) is a major cause for concern.
NEETs consist of both the unemployed—those without work but actively
looking for work—and inactive youth outside the labour force, who are
not engaged in any educational or training activity. Because they are
neither improving their future employability through investment in skills,
nor gaining experience through employment, the risks of both labour
market and social exclusion is particularly high. Worryingly, Sri Lanka
recorded a NEET rate of 26.1% in 2016, above the ILO global average
estimate of 21.8%.

An ongoing IPS study examined the NEET population in Sri Lanka, and
looked at factors that influence the risks of becoming NEET, using data
from the 2016 Labour Force Survey, and descriptive and regression
analysis. This blog elaborates on some of its key findings.
Disruptions in School-to-Work Transitions
As panels (a) and (b) of Figure 1 show, a breakdown by age indicates
that both the number and percentage of NEETs are considerably higher
among the older youth group, aged 20-24 years. This observation makes
sense, given that a large share of the younger youth cohort (74%) is
still engaged in secondary education, and hence out of the NEET group.
What is concerning is that while 74% of the 6,656 15-19-year-olds are
engaged in education, less than half of this number, or only 42%, are
employed in the 20-24 age group. This suggests that young Sri Lankans
face challenges in making the transition from education to employment,
thereby making them more vulnerable to fall into NEET status after
5000
completing school education. School-to-work transitions can be
challenging due to multiple factors including lack of required skills, lack
of available opportunities, or lack of guidance and direction in finding
available job opportunities.
Factors Affecting NEET Status
The findings on factors influencing NEET status suggest that the above-
mentioned school-to-work transition issues indeed contribute to the
large share of disengaged youth in Sri Lanka. As Figure 2 shows, while,
not surprisingly, those who have passed the G.C.E. Ordinary Level exam
(O-Levels) face a lower risk of becoming NEET compared to youth who
have not completed O-Levels, NEET risks are actually higher for the
well-educated youth with G.C.E. Advanced Level (A-Levels) and above
qualifications. This finding is likely reflective of the high unemployment
rates observed among Sri Lanka’s educated youth, highlighting
issues faced in transitioning from education to employment, despite
sound educational qualifications.

An individual who is proficient in English faces a 9% lower risk of

4000
becoming NEET compared to a similar individual who is illiterate in
English, suggesting that soft skills also matter, apart from academic
3000
qualifications, to become engaged in education, employment, or
2000
training. Indeed, prior research identifies soft skills gaps, particularly
in English and computer skills, as contributing significantly to the
1000 youth unemployment problem.

0 Living in a household where at least one adult has passed the

O-Levels, as opposed to a household with no well-educated

42

adults,also lowers the chances of being NEET. This suggests that
parental guidance plays an important role in keeping youth engaged
and helping in school-to-work transitions. For instance, a well-educated
parent would be more knowledgeable, or have the necessary resources
and networks, to guide their children towards available educational,
training, and employment opportunities in line with their capabilities and
interests.
Location is another factor affecting NEET status, with youth from
more remote and conflict-affected areas facing higher probabilities of
becoming NEET compared to their counterparts residing in the Western
Province. Again, transitioning from education to employment is likely
to be more challenging in rural settings, given the high concentration
of jobs and higher educational and training institutes in urban areas,
and the relatively less-developed networks and connections in remote
locations.
Policy Implications
The above findings emphasise the pressing need for policies that
would assist in smoothening the school-to-work transition process,
so that youth are more actively engaged in the economy. Measures
to enhance the employability of educated youth is one priority area.
While developing soft skills such as English and information technology
are important in making youth more employable – particularly in
marginalised areas where access to opportunities are currently limited –
also critical is the need to focus on specific skills that future jobs would
require.
As identified in the 2019 World Development Report, these include
advanced cognitive skills such as complex problem-solving, socio-
behavioral skills such as teamwork, and skills that facilitate adaptability
such as reasoning and self-efficacy. Strong human capital foundations
are key to building such skills, and, as such, need to be incorporated
into education curricula, starting from early childhood education itself.
There is also a need for government-led career guidance initiatives,
established at the school-level, targeted at advising and directing youth
to available education, training, and job opportunities. Such initiatives
are particularly important in circumstances where parents are not well-
educated and hence not in a position to guide their children themselves,
and for households living in remote and less-developed locations, with
limited knowledge of available education and employment opportunities.
43
By Wimal Nanayakkara
Sunil is a labourer who lives in a small hut with his wife, and their two
children, aged seven and four years. Both Sunil and his wife have had
schooling only up to grade five. Their hut has no electricity or proper
sanitation facilities. The elder child is not in school yet. It is clear that
Sunil and his family are facing many deprivations simultaneously, and
low income is just one dimension of poverty.
Multidimensional Poverty (MDP) is an effective measure that captures
the many different deprivations faced by the poor. Unlike income poverty,
MDP takes into consideration the different types of deprivations that
individuals experience simultaneously. The Alkire-Foster Method (AFM),
that gauges MDP, involves three dimensions, health, education, and
living standards, which are measured through 10 indicators. Figure 1
shows the dimensions, the indicators (deprivations), and the relevant
weights used in this analysis. The MDP reveals the types of deprivations
faced by the poor, poverty levels in different regions of the country,
and the different sub groups suffering from poverty. It also identifies
different types of deprivations, which can help determine region-specific
strategies to combat poverty and inequality.
his analysis, based on the Household Income and Expenditure Survey
2016 (HIES-2016), examines the different groups that face MDP, where
they live, and the types of deprivations, as well as the percentages of
the deprivations they face. It examines both MDP and those in Near
Multidimensional Poverty (NMDP).

Lurking in the
Shadows:
A Closer Look at
Multidimensional
Poverty in Sri Lanka

The "weighted sum of deprivations" for a household is determined by adding the weights for the deprivations the household is facing
simultaneously. Multidimensionally poor are those living in households facing a weighted sum of 33.3% of more of he deprivations and
NMDP are those living in households facing a weighted sum of more than 20.0% and less than 33.3% of deprivations. The NMDP are
those considered to be vulnerable to MDP. As the weighted sum of deprivations of Sunil's household in the above example is 44.6% and
therefore exceeds 33.3% Sunil's family is multidimensionally poor.

44
Contributions of Deprivations to MDP Figure 2: Incidence of MDP and NMDP, by Socioeconomic Group-2016

and NMDP 40.0

35.0
% in Near Muldimensional Poverty (NMDP) or
Incidence of NMDP
The first pie chart in Figure 1 show the magnitude of the contributions of 30.0
% in Muldimensional Poverty (MDP) or
deprivations to MDP. The second shows the corresponding contributions

% in MDP/ Naer MDP

25.0
Incidence of MDP

31.0
20.0
to NMDP. It is clear that the highest contributions to MDP and NMDP 15.0

13.8
are from deprivations 1, 3, 4, and 7. For MDP, the highest contribution 10.0

9.0
5.0 6.6

7.0

5.4
(24.5%) is from the lack of education; no one in the household has

5.3
5.7
3.7
0.0

6 years of education. This is followed by the two health-related

deprivations, and the lack of access to improved sanitation.

These four elements make up almost 75% of the deprivations

contributing to MDP. In the case of NMDP, the main contribution is
related to inability to work; head of the household is not working due to a Source: Author’s esmates based on Household Income and Expenditure Survey-2016, DCS
chronical illness, disability or old age. This amounts to 33.9%. The other
main deprivations are related to education, health, and sanitation. These Spatial Distribution of Persons in MDP or
four aspects account for 86.1% of deprivations contributing to NMDP.
NMDP
Figure 1: Percentage Contribuons of Deprivaons Faced by Persons in MDP/NMDP The regions where a majority of the people in MDP or NMDP lives should
by Type of Deprivaon be identified to develop area-specific strategies. In Sri Lanka, the highest
Contribuon to Contribuon to Near number of persons in MDP or NMDP are in the Kandy district (9% out of
Muldimensional Poverty Muldimensional Poverty
the total number in MDP or NMDP in the country). Other districts with
24%
13% high shares of MDP or NMDP are Kurunegala (8%), Ratnapura (7.5%),
Gampaha (6.6%), Galle (5.6%), and Matara (5%). It is also necessary to
13% 23% 1
7 1 consider the incidence of MDP or NMDP or the percentages of persons
7
3 17% in MDP or NMDP within each district. The incidence is highest in the
4
3
4
Batticaloa district (19.5%), followed by Trincomalee (18.2%), Mullaitivu
16% (16.4%), Kilinochchi (15.9%), Ratnapura (15.9%), and Kandy (15.4%).
22% 34% While the incidence of MDP and NMDP is low in some districts, the
number of people living in poverty in absolute terms are high.
1-Educaon: No one in the household has completed 6 years of school educaon [16.7]

2-Educaon: Child in compulsory age in the household not aending school [16.7]
Figure 3 shows that the number of persons in NMDP in almost all
3-Health: Household not receiving at least 80% of calorie (energy) requirement although
expenditure on food is 60% or more [16.7]
districts is considerably high compared to those in MDP. This indicates
4-Health: Head of household not working (chronically ill/ disabled/ too old) [16.7] that, although the incidence of MDP is low in Sri Lanka, a large number
5-Living condions: Household has no electricity [16.7] of people are at risk of slipping into MDP.
6-Living condions: Household not having access to safe drinking water [5.6]
Figure 3: Distribuon of People in MDP / NMDP and the Incidence of MDP/
7-Living condions: Household not having access to improved sanitaon [5.6] NMDP by Districts-2016
8-Living condions: Household using wood,dung or coal for cooking [5.6]
No. of Pesons in MDP / Near MDP

250000
9-Living condions: Household having a dirty floor (mud, sand / dung) [5.6]
200000
10-Living condions: Assets of the household inadequate [5.6]
Note: The percentage contribuons of deprivaons given in the above chart are for persons who have been idenfied 150000
as Muldimensionally Poor / Near Muldimensionally Poor; The contribuons are highest for deprivaons 1,3,4 and
7; The weight “x” pertaining to each indicator (or deprivaon)given in [x% ] 100000
Source: Authors esmates based on Household Income and Expenditure Survey-2016, DCS
50000

Who are Battered by Multiple Deprivations?

Although the incidence of MDP in Sri Lanka is only 1.9% (around
400,000 persons), nearly 10% of the population or around two million No. of Persons in MDP No. of Persons in Near MDPNear MDP
people are in NMDP, which means they can slip into the former easily.
Monitoring all Dimensions of Poverty
Source: Author’s esmates based on Household Income and Expenditure Survey-2016, DCS

Altogether, 2.4 million people (or 11.5% of the population) in Sri Lanka
The strategies to minimise MDP and NMDP depend on the types of
are either in MDP or NMDP. Figure 2 shows that households headed
deprivations faced by the poor, their locations, and their socioeconomic
by persons who are retired / too old to work / disabled is the main
groups. Continuous monitoring of all dimensions of poverty and
socioeconomic group (SEG) facing multiple deprivations. This group
identifying the most threatened regions and groups are essential
records the highest incidence of MDP of 6.6% and NMDP of 31%. More
to eliminate all forms of poverty. Such information will be useful in
than half of the people who are either in MDP or NMDP belong to this
developing region specific strategies.
group. The other three SEGs with high shares of MDP or NMDP consist of
households headed by agricultural labourers, non-agricultural labourers
As shown in Figure 1, there are four major deprivations contributing
and skilled agricultural, forestry, and fishery workers. These four groups
to MDP and to NMDP. If these four deprivations could be minimised or
accounts for nearly 80% of those in MDP or NMDP.
eliminated, it would be possible to eliminate MDP. Ensuring at least eight
years of quality education for all, additional attention to households
headed by persons who are unable to work, targeted measures to
combat undernutrition, and the provision of sanitation facilities to
deprived households are some of the interventions that can help in this
regard.

45
Alleviating Poverty The average energy requirement has been estimated to be 2030
kilocalories per day, per person in Sri Lanka. The cost of meeting this
requirement of energy per person, per month is computed by multiplying

in Sri Lanka: the per capita calorie cost by 30×2030 (i.e. 30 days x 2030 kilocalories).
The Food Poverty Line, based on these computations was Rs. 973 per
month in 2002.

Take a Broader Look Unlike the Food Poverty Line, estimating the non-food component is
more complex. It is estimated by taking the average of the median per-

at Poverty Measures!
By Wimal Nanayakkara
Sri Lanka has managed to bring down its poverty from 26.1 per cent
in 1990/91 to just 4.1 per cent by 2016. However, it is not enough to
consider only income poverty when monitoring poverty, as many are
faced with multiple dimensions of poverty. It is important to note that
many Sri Lankans live just above and very close to the National Poverty
Line (NPL). For example, more than 400,000 persons (Table 1) fall within
10 per cent above the NPL and around one million persons live within
20 per cent above the NPL. Although only 1.9 per cent of the population
in Sri Lanka are in multidimensional poverty (MDP), 9.5 percent are near
MDP.
As such, it is important to have a broad look at poverty, when
developing strategies to alleviate poverty. This article briefly explains
the methodology used in determining NPL and the Global Poverty Lines
(GPLs), when estimating poverty in Sri Lanka. The methodology used in
the determination of NPL is often debated and GPLs are misinterpreted
when estimating poverty. As such, the article attempts to clear some
misconceptions on these poverty lines and stresses the importance
of estimating poverty using different measures and dimensions. It
is also important to rebase the NPL, which was developed in 2004
based on Household Income and Expenditure Survey (HIES)-2002 of
the Department of Census and Statistics (DCS), as the spending and
consumption patterns of the poor groups change with time.
capita non-food expenditures of the reference group, whose per capita
food expenditure is close to the Food Poverty Line and whose per capita
total expenditure is close to the Food Poverty Line. This methodology was
developed by a team of experts from the Sample Surveys Division of the
DCS and two international experts. The details on the methodology and
the team of experts is found in Poverty in Sri Lanka: Issues and Options.
As the spending and consumption patterns of the poor change with time,
it is desirable to rebase the NPL using the latest HIES-2016, so that a
more realistic estimates for poverty in Sri Lanka could be made.
Using Poverty Estimates Based on Global or
International Poverty Line
Poverty measures based on Global Poverty Lines attempt to hold the real
value of the poverty line constant across countries. Initially the GPL used
by the World Bank to measure extreme poverty was $1.08 a day (based
on 1998 prices) and was referred as “a dollar a day”. This was widely
accepted as the international standard for extreme poverty. This was
replaced by the GPL $1.25 a day (based on 2005 prices). Subsequently,
in October 2015, $1.25 a day PL was updated to $1.90 a day (based on
2011 prices).
There seems to be a misconception that the GPLs could be used to
estimate poverty in Sri Lanka, by simply multiplying the GPLs by the
exchange rate during the period in which HIESs have been conducted, to
compute its value in local currency. This is totally false. For example, if
extreme poverty is to be estimated, it is necessary to first convert $1.90
to local currency using 2011 Purchasing Power Parity (PPP).

Table 1: Incidence of Poverty in Sri Lanka in 2016 based on Different Measures of Poverty
Determination of
National Poverty Line Value in Rs. in
2016 at Naonal
[Equivalent in
US$
% of
Populaon
Number of
Persons
Difference
compared
(NPL) in Sri Lanka Poverty Measure
Level/ [Rs.
Equivalent of
(2011PPP),
for specified
below
specified line
below the
specified
to Naonal
Poverty Line
The ’Cost of Basic Needs (CBN)’ GPL (2011PPP)] NPLs] per day (or Poverty line
per month Headcount)
method, used in most developing
countries to determine the NPL, 1 Naonal Poverty Line (NPL) Rs.4166.00 [US$2.60] 4.1 843,300
2 NPL increased by 10% Rs.4582.60 [US$2.86] 6.1 1,255,702 412,402
measures absolute poverty. The 3 NPL increased by 20% Rs.4999.20 [US$3.12] 8.7 1,801,048 957,748
CBN is made up of the cost of a 4 Global Poverty Line (GPL) for [Rs.3065.00] US$1.90 0.7 150,624 -692,676
consumption bundle, which includes Extreme Poverty [$1.90 a day per
person (2011PPP)
both food and non-food items, that 5 Global Poverty Line (GPL) [$3.20 a [Rs.5127.00] US$3.20 9.5 1,961,915 1,118,615
is adequate to meet the nutritional day per person (2011 PPP)]
6 NPL increased by 23% Rs.5124.18 [US$3.19] 9.5 1,959,823 1,116,523
requirements of a population likely
7 Relave Poverty (RP)* 10.3 2,120,886 1,277,586
to be poor (or a reference group 8 Muldimensional Poverty (MDP)# 1.9 397,123
initially identified based on the 9 Near Muldimensional Poverty 9.6 1,988,487
(NMDP)
HIES-2002 conducted by the DCS). 10 MDP + NMDP 11.5 2,385,610 1,542,610
The households in the 2nd to 4th Note: *- Based on 40% of the Median per capita income. [RP is usually more suitable to measure poverty developed countries];
deciles, ranked by real per capita #-The incidence of MDP and NMDP may vary slightly depending on the indicators used to compute them.
Source: Author’s esmates based on HIES-2016, of the DCS
total consumption expenditure are
chosen as the reference group. The
aggregates of food expenditures for all food items consumed by the The PPP conversion factor for private consumption (including
“reference group” and their calorie intakes are then calculated. The cost consumption from own production), is the number of units of a country’s
per calorie is then derived by dividing the former by the latter. currency required to buy the same amount of goods and services in
the domestic market as one $ would buy in the United States. After the

46
 Percentage of Populaon in Poverty (or Near Poverty) based on
Different Measures
MDP + NMDP 11.5
Near Muldimensional Poverty (NMDP) 9.6
Muldimensional Poverty (MDP)# 1.9
Relave Poverty (40% of Median PC HH Income)* 10.3
NPL increased by 23% 9.5
Global Poverty Line [$3.20 a day per person (2011 PPP)] 9.5
Global Poverty Line [$1.90 a day per person (2011PPP) 0.7
NPL increased by 20% 8.7
NPL increased by 10% 6.1
Naonal Poverty Line (NPL) 4.1
0 2 4 6 8 10 12 14

GPL $1.90 a day is converted to local currency at 2011

prices, it needs to be inflated using the Consumer Price
Index (CPI), to determine the value of the $1.90 a day in
local currency, pertaining to the periods in which HIESs
have been conducted, which amounts to only Rs. 3,065
per month per person in 2016, while the corresponding
NPL was Rs. 4,166 [($2.60) 2011 PPP]. As such, if the
GPL of $1.90 a day is to be used to measure extreme
poverty in Sri Lanka, in 2016, only 0.73 per cent of
the population is in extreme poverty (Table 1 ),
which could be checked, if necessary using
PovcalNet. The World Bank also uses $3.20
a day, poverty line to compare poverty in
Lower Middle Income Countries (LMICs)
and $5.50 a day in Upper Middle
Income Countries. The main aim of
GPLs is to compare the incidences
of poverty at national level,
among countries. These
international poverty
lines are generally
not suitable for
the analysis
of poverty
within a
country.

For that purpose,country specific poverty lines are the poor and near poor based on
needed, reflecting the country’s economic and social different measures show that at least
situations. To compare the status of poverty among 11.5 per cent of the population in
regions within the country, it is more appropriate to Sri Lanka is either poor or near poor
use the National Poverty Lines, which also need to in some form. The near poor could
be rebased, as explained before.However, no single easily slip back to poverty due to
definition or poverty measure will ever be suitable to any economic shocks, natural disasters, etc.
estimate all forms and dimensions of poverty in the All these estimates could be made at sector,
country. district, as well as at different socio-economic
groups, which would be useful in developing
What do the Poverty Figures Mean poverty reduction strategies, as there are huge
variations in the incidence of poverty between
for Sri Lanka? regions and socio-economic groups.
The above table compares incidence of poverty based on
NPLs, GPLs, RP and MDP, and NMDP. These estimates of
47
 Women in Times of
Disaster:
Gender Dimension of Disaster
Management in Sri Lanka
By Sunimalee Madurawala

“Incessant monsoonal rains during the last week of May 2017 triggered
floods and landslides across Sri Lanka, affecting over half a million
people and according to national authorities, killing over 200 people.
“I was five months pregnant when the floods came. I had to go to
my friend’s house up the mountain for safety with my 2.5-year-old
daughter,” said Priyanka 32. Standing outside her house later, a stone’s
throw from the river banks, you can imagine how terrifying it would
have been to watch the flood waters rise to your house. Priyanka and
her family were unharmed, but her husband’s business was destroyed,
affecting their livelihoods.”- International Planned Parenthood
Federation

Owing to climate change, natural disasters have become an almost

commonplace occurrence in the world. Developing countries, especially
island nations like Sri Lanka, are particularly prone to such disasters,
due to two reasons; their geographical location, which is vulnerable to
the rising sea levels, and their limited capacity to adapt, due to the lack
of access to financial resources and technologies. Unfortunately, natural
disasters have a gender aspect, where women are often affected more
severely than men.

A woman’s pre-disaster familial responsibilities are magnified and

expanded by a disaster, often with significantly less support and
resources. This does not mean that men are not affected at all; but,
given that women are often in a disadvantaged position in many
contexts, the promotion of gender equality implies that attention need
to be paid to female empowerment in disaster management (DM).

48
Gender and Disaster Management
Experiences from different parts of the world show that women are
more vulnerable to the impacts of natural disasters. In fact, women
and children are 14 times more likely to die than men during disasters.
For instance, when the devastating tsunami hit Sri Lanka in 2004, the
majority of the dead and missing was females (Figure 1). It was easier
for men to survive during the tsunami because swimming and climbing
trees are skills mainly taught to boys.
Gender makes differences in all aspects of a disaster; vulnerability,
resilience, and recovery. Additionally, the four basic components of DM,
mitigation, preparedness, response, and recovery, are directly linked
with gender. Hence, the needs and vulnerabilities of men and women
and their capacities and priorities should be considered separately in
DM.
Disaster Management and Gender
Mainstreaming in Sri Lanka
According to the Sri Lanka Disaster Management Act No. 13 of 2005,
the National Council for Disaster Management (NCDM) is the supreme
body for disaster management in Sri Lanka. In the recent years,
there have been some promising initiatives in mainstreaming gender
issues into the DM policies of Sri Lanka. However, the level of gender
consideration varies among those documents (Table 1).
Policies in Practice: Issues and Way
Forward
Despite some progress in the recent past, there are gaps in addressing
gender issues especially at the implementation level in Sri Lanka.
A major issue in this regard is the low participation of women in the
pre and post disaster decision-making process at all the levels. This
leads to gender blindness in DM projects. For an example, NCDM,
the supreme body for DM in Sri Lanka, consists of the President, the
Prime Minister, Chief Ministers, five members from the opposition,
and several Ministers. But there is no representation from the
Ministry if Women’s Affairs (Figure 2). Further, there is an overall poor
engagement of women when it comes to the delivery of early warnings
and the preparedness for response, both at the community and local
official levels.
Therefore, it is important to enhance women’s participation in the
decision-making process at all levels. It has been observed that
women’s representation at the national level as well as at the
community level is weak and there is a limited space for their voice.
A compulsory number or a quota for female representation can
be introduced for committees at all levels as an initial step in
addressing this issue and measures have to be taken to ensure female
representation. A participatory approach is proposed to ensure equal
and gender-sensitive participation of women and men, leading to better
DM policy and programme designs.
The lack of sex-disaggregated data in Sri Lanka is another challenge.
Generating disaster related sex-disaggregated data is important to
properly understand and analyse the gendered aspects of disasters.
The unavailability of such data hampers informed planning, decision-
making, and the provision of appropriate support in pre and post
disaster situations.
Establishing a strong and reliable national level mechanism to generate
sex-disaggregated data should be considered a top priority, as such
data would facilitate more effective and sustainable humanitarian
responses and indicate the direction for future policy needs. At the
same time, it is also important that policy makers, implementers,
researchers and other stakeholders use sex-disaggregated data as
much as possible in order to understand the gendered aspect of
disasters.
Finally, there should be gender sensitive spacing arrangements in
temporary shelters. Privacy for women and girls in living spaces,
segregated sanitation facilities, including menstrual hygiene
management, are major concerns in temporary welfare centres.
Similarly, expecting and lactating mothers face hardships in meeting
their specific requirements in these centres.
In this regard, it is important to take measures to ensure that women
and girls meet their needs in temporary shelters. When setting up
temporary shelters, attention should be paid to designing them in a
manner which facilitate specific needs of women.
49
Trash Talk: Dealing with
Marine Plastic Pollution
in Sri Lanka’s Oceans
By Dinushka Paranavitana
If current marine plastic pollution trends continue, the ocean will contain
more plastic than fish by 2050, predicts the World Economic Forum
report The New Plastics Economy. The Ocean Conservancy estimates
that over 150 million metric tons of plastic are currently circulating in
the ocean, while another eight million metric tons are added annually.
The study emphasises the severity of this issue, equating it to dumping a
truckload of plastic into the ocean every minute, of every day, for a year.
In 2016, South Asia generated 26 million tonnes of plastic waste and
unsurprisingly, this has led to the creation of a “dead zone” – an area
where oxygen levels are too low to sustain marine life – in the Bay of
Bengal.
Marine plastic pollution originates partly from waste dumped by
marine vessels and offshore gas/oil rigs, but a vast majority, almost
80% is from land-based sources. This blog argues that the solution to
the rising problem of land-based marine plastic pollution in Sri Lanka
is a combined force of banning single-use plastics, proper waste
management, and the use of sustainable ecofriendly alternatives.
50
Health Risks of Plastic Pollution
A grave consequence of marine plastic pollution is that many marine
species become victims, often ingesting plastic debris that harm or
kill them. This also transfers harmful chemicals and microplastics to
humans, as approximately around 3 billion people rely on seafood
as their primary source of protein. A Belgian study calculated that
consumers of shellfish could be eating almost 11,000 plastic fragments
annually, while another study identified that one third of UK’s fish contain
some form of plastic. This threat is not limited to Europe; contaminated
fish have been found across the globe from the Americas to Asia,
indicating that this is a pertinent global issue. Studies have also shown
the presence of microplastics in Sri Lankan oceans.
Moreover, humans are also absorbing other toxic substances, such as
metals and pesticides, that easily latch on to the surface of plastics.
Often, marine creatures are unable to distinguish between plastic and
food, while new research shows that plastics attract a form of algae
growth that is an alluring meal for sea creatures. Many of the chemicals
identified, accumulated on microplastics, pose a significant threat to
human health, affecting the functions of the liver, kidneys, and endocrine
glands, in addition to being carcinogens.
Impact on Sri Lanka
This issue is a cause for concern for the island nation, as a significant
population are dependent on the fisheries industry for their livelihoods.
Approximately 221,000 fishermen contribute to around US$ 130
million worth of fish exports, making up 1.3% of the country’s GDP.
The Ministry of Fisheries reports that there has been a rise in the per
capita consumption of fish by local consumers and that fish contributes
to around 55% of total protein consumed in the country. The report
predicts a 2.4% growth in the consumption of fish among locals citing
the nutritional benefits of fish consumption with Omega-3 fatty acids,
Vitamins D and B2, and Calcium.
Sri Lanka’s Efforts to Combat Plastic
Pollution
Sri Lanka’s first attempt to control plastic usage began as early as 1994,
when a gazette was issued by the Ministry of Environment, banning
polyethene, which failed to be implemented. A second attempt in 2006
and a third attempt in 2017 sought to ban the production and the use
of polyethene sheets, polystyrene based packaging and cutlery, and the
burning of plastic and other similar combustible material. However, the
Sri Lankan government struggled to implement policies restricting the
use of plastic, succumbing to pressure from plastic manufacturers and
retailers. The Centre for Environmental Justice attributes the failure to
the lack of stringent enforcement mechanisms by the government and
the Central Environmental Authority (CEA).
On a positive note, the Sri Lankan government has successfully
introduced the concept of garbage segregation, separating plastic and
polyethene for recycling; a small step towards effectively combatting
marine plastic pollution. The 2019 Budget offers hope, as a proposal was
made to substitute single-use plastics with alternatives by 01 September
2019. Sri Lanka has also joined Britain, New Zealand, and Ghana to form
the Commonwealth Clean Oceans Alliance (CCOA), in an effort to fight
plastic pollution. The CCOA pledged €61.4 million in funding to boost
research across Commonwealth countries in combating plastic pollution
and conserving the marine environment.
Reasons for Failure
Banning plastic in Sri Lanka is a contentious issue met with strong
resistance from the general public. The resistance is twofold; first, from
consumers who are reluctant to change, as plastic has become an
integral part of their daily lives and second, from plastic manufacturers
who produce around 120,000MT of plastic, equivalent to US$ 55 million
annually.
From history, it is apparent that the government did not put adequate
efforts to providing the public with suitable alternatives to plastic. Simply
imposing regulations and bans have no effect in solving the issue.
Legislation should be present to push organisations and citizens towards
responsible production and conscious consumption.
One of the major concerns of the consumer is that plastic substitutes
do not offer the same affordability and convenience as using plastic.
However, with new technological advances and developments
biodegradable substitutes are now able to match the functionality of
plastic.
Solutions to the Plastic Problem
Sri Lanka’s South Asian neighbor, Bangladesh is developing the “Sonali
bag”; a biodegradable alternative to polythene bags made of jute
cellulose. However, a lack of funding has prevented mass production.
Similarly, organisations have invested in developing biodegradable
products around the world; from containers that are 100% edible to
packaging made of mushroom roots that have the same quality and
functionality as foam/plastic packaging.
To combat the problem of plastic in Sri Lanka, the government should
work collaboratively with the private sector and the public in developing
strong policies, which cover legislation banning the use and production
of plastic, education that encourages the public to recycle and manage
waste appropriately, funding and supporting research and development
towards designing bio degradable alternatives.
51
Linking Disaster Risk
Management into
Economic Policy
Planning in Sri Lanka
By Kanchana Wickramasinghe
As several districts in Sri Lanka continue to recover from the prolonged
drought last year, recurring floods and landslides hamper economic
activities in the country. Sri Lanka was ranked as the second most
affected country by the impacts of weather-related losses in 2017,
according to the Global Climate Risk Index 2019. Worryingly, the
country’s situation has worsened since 2016. This highlights Sri Lanka’s
vulnerability to climate impacts and the need for effective policies.
52
The good news is that the 2019 Budget proposes several measures to
improve Sri Lanka’s disaster resilience, as shown below.
When it comes to natural disasters, it is the agriculture sector that
is hit the hardest. The total damages and losses in the sector, due to
floods and landslides in 2016, were estimated to be nearly Rs. 3.6
billion, according to the Post Disaster Needs Assessment (PDNA). The
estimated cost for the loss of paddy alone was Rs. 553 million. The
districts of Jaffna, Anuradhapura, and Mullaitivu – where communities
heavily rely on farming – were the most affected. Meanwhile, a survey
carried out in the Anuradhapura district revealed that climate-related
disasters and rainfall uncertainties are prominent among a number
of risks/uncertainties faced by farmers. As a result, 2019 Budget
proposals provide a more secure supply of water for agriculture through
multi-purpose development projects, canal construction projects and
rehabilitation of tanks.
Management of Disasters:
Challenges and Gaps
Frequent natural disasters call for an efficient mechanism for
Disaster Risk Reduction (DRR) in Sri Lanka. There have been notable

improvements in disaster risk management over the years; considerable
progress has been made to shift focus from post-disaster measures to
improve preparedness to face disasters. However, Sri Lanka’s recent
experiences with natural disasters indicate that several areas of DRR are
lagging behind, specifically, the ‘preparedness’ component which has
not received due attention; disaster relief mechanisms, including disaster
compensation, showed notable inefficiencies, as noted during the floods
in 2017.
There were significant targeting issues in providing relief to people
affected by natural disasters in 2016 and 2017, as revealed by the Sri
Lanka Rapid Post Disaster Needs Assessment Floods and Landslides
– May 2017. The distribution of relief goods, such as food, water, and
medicine, was not inclusive, as key socio-economic information about
affected groups were missing.
The issue was more severely felt when providing relief items to highly
vulnerable groups such as infants, women, and the elderly. Also, the
remote areas, with limited access due to poor road conditions and lack
of transport facilities, were largely neglected following disasters. There
were delays and even cancellations of relief distribution, as the exact
locations of the displaced people could not be identified, according
to the Sri Lanka Rapid Post Disaster Needs Assessment Floods and
Landslides – May 2017. Such issues point to the importance of
establishing relief centres, to ensure that relief goods reach those who
need it the most.
In addition, gaps were observed in Sri Lanka’s early warning system.
Disaster forecasts are particularly important to the agriculture sector, as
livelihoods are directly affected by weather patterns. Despite existing
communication systems for early warning dissemination, there are
issues in providing localised warnings to vulnerable communities. The
absence of a proper mechanism at ground level is an issue. Disaster
experiences in the last few years show that vulnerable communities
were not adequately prepared to take heed of these early warnings.
The lack of disaster information is a key barrier in conducting
assessments for effective policy formulation, guiding DRR activities,
and achieving disaster resilience in Sri Lanka. Information can be in
the form of loss and damage assessments, research findings, hazard
and vulnerability assessments, disaster forecasts, early warnings, and
weather data. Data on losses and damages are particularly important to
understand the economic impacts of disasters.
The Desinventar database, managed by the Disaster Management
Centre (DMC) is the only available source for disaggregated data.
However, it does not encompass all the vital information needed to
formulate DRR tools and garner disaster-related investments. As the
draft National Disaster Management Plan (NDMP 2018-2030) highlights,
there are notable gaps in terms of research-based information on
natural disasters.
While early warnings and disaster relief mechanisms are vital in
reducing the impacts of disasters, mitigation and preparedness
remain the key strategies for reducing the impacts of disasters. This
is especially relevant to floods and landslides as they have a higher
economic cost, when compared with droughts. The draft NDMP
2018-2030 points out that the investments on structural measures,
intended to provide physical protection from disasters, are low in Sri
Lanka. Certain initiatives are in place in mitigation aspects. The Climate
Resilient Improvement Project has a component which supports the
implementation of such investments to ensure short-term integrity of
flood control and irrigation infrastructure.
Strengthening DRM
Improving the local capacity to deal with disasters is vital for enhancing
the effectiveness of early warning and disaster relief mechanisms. Such
improvements can minimise the disaster related social costs, such as
mortalities and injuries. Further, issues in the relief system should be
eliminated to meet immediate basic needs of the disaster victims. This
requires the formulation of a proper relief system, with clear criteria for
relief distribution.
Effective DRM should be supported by timely and comprehensive
climate information. The existing gaps can be eliminated to a great
extent by developing a repository with online facilities to compile and
share data among key users. The sharing of research-based information
helps to integrate such information to decision making.
At the policy level, the need of the hour is to mainstream disaster
resilience efforts when formulating and implementing development
projects. Suitable policy and planning guidelines are crucial in this
regard.
The National Physical Planning Policy and the Plan 2050 (draft), takes
disaster risks into account and can serve as the basis for development
projects at the national level. Disaster related aspects can be introduced
at the initial stages of planning and obtaining approvals for projects.
The Initial Environment Examination (IEE) and Environmental Impact
Assessment (EIA) should be revised to include elements of disaster
resilience. Proper integration of DRM aspects into planning will also
enhance investment decisions on disaster resilience.
53
Nisha
Arunatilake
In this edition of the Talking Economics
Digest, we feature Director of Research at
the IPS, Nisha Arunatilake. She speaks on
the different areas of research IPS focuses
on, the impact of evidence-based research
on policy, and her vision for the Institute’s
future.
Q: What are the different areas of
research the IPS focuses on?
NA: The IPS research program is organised around six primary research
themes with several identified focus areas within each thematic area, as
detailed below. Each research theme is headed by a senior researcher.
This program was developed based on the development policy agenda
of the government, and policy priorities identified by the Institute in
consultation with external stakeholders. The scope of the research
programme is shaped by the research expertise within IPS, long-term
funding availability and the ability to obtain or generate information for
conducting research.
1. Policy Reforms and Competitiveness
Macroeconomic policy; Public finance; Structural reforms; Trade;
Regional integration; Investment and finance.
2. Private Sector Development
Small and medium-sized enterprises; Entrepreneurship; Foreign Direct
Investment; Infrastructure development; Governance and institutions;
Tourism; Technology and Digitalization.
3. Human Resources for Sustained Development
Skills and education; Social sector finance and management;
Demographic change and development; Health; Employment and Labour
markets.
4. Migration and Urbanization
Remittances and macroeconomy; Migration and labour markets;
Household impacts of migration; Migration policies and administration;
Inward migration; Urbanization; Internal migration.
5. Poverty and Vulnerability
Poverty and inequality; Social protection; Financial inclusion;
Vulnerability; Sustainable Development Goals;
6. Environment, Natural Resources and Agriculture
Climate change; Natural resource policies and institutions; Environment
policies and green economy; Food security; Agriculture policies and
productivity; Agriculture value chains.
54
INSIDE IPS
Q: In what ways does the IPS impact the lives
of Sri Lankans and influence policy reforms?
NA: The IPS adopts several approaches to improve lives of Sri Lankans
through policy reforms. This process starts with the development of
the research program in consultation with stakeholders, where we
identify policy gaps and policy implementation gaps. The findings of
research undertaken to fill these gaps are communicated to the general
public, policy makers and other stakeholders through a variety of
ways. The general public is informed of this research through research
reports, blogs, newspaper articles, policy briefs and workshops. In
addition, the IPS conducts strategic research communications through
targeted meetings with policy makers. Our researchers also influence
policymaking by participating in different policy committees set up by
ministries at different levels.
Q: In an era marked by rapid technological
advances, what role does high-quality, ev-
idence-based research play Sri Lanka?
NA: Technological advances are revolutionizing production processes and
changing the way people live and work globally. Industrialised countries
are already investing in infrastructure, training individuals, and revising
policies to maximize benefits and to safeguard vulnerable populations
from adverse consequences of such developments. High quality research
is needed to identify policy needs to develop a facilitating environment
to improve gains from technological advancements in Sri Lanka and to
sustain the competitiveness of the country globally.
Q: What are the areas of research that you would
like IPS to branch out into in the future, and why?
NA: Technological change is influencing production processes,
occupation skill profiles, consumption patterns, and organisation of
work in the country. Such changes are also making the existing social
protection system less effective and regulation policies inadequate.
Research is needed to better understand these changes and to
advocate reforms to facilitate technology driven economic growth
while safeguarding the economy from adverse impacts of technological
change.
Janaka
Wijayasiri
In this special edition of the Talking
Economics Digest, we ask IPS Research
Fellow, Janaka Wijayasiri, to give an
introduction to the 12th South Asia
Economic Summit, organised by the Institute
in Colombo this year.
Q: Can you tell us about the significance of
the 12th South Asia Economic Summit?
JW: The 12th South Asia Economic Summit (SAES XII) is organised in
Colombo, Sri Lanka by the IPS, with four other prominent South Asian
think tanks on the 26-27th September. The South Asia Economic Summit
(SAES) was first launched in 2008 in Colombo, Sri Lanka and since then
11 Summits have been held each year in the capitals of South Asian
countries. This year’s Summit in Colombo is co-sponsored by the World
Bank, Asian Development Bank, the Swiss Embassy in Colombo and
the Maldives, the Commonwealth Secretariat, UNESCAP, and The Asia
Foundation.
SAES has provided an important regional platform for discussing and
debating socio-economic challenges facing the region. SAES also aims
to foster and develop regional integration and co-operation among the
South Asian countries. It has evolved into one of the most looked-forward
to events for those with interest in development and regional integration
in South Asia.
Q: Why does this year’s Summit focus on
Fourth Industrial Revolution (4IR)?
JW: SAES XII focuses on theme of Shaping South Asia’s Future in the
Fourth Industrial Revolution (4IR). This year’s SAES aims to uncover
the prospects and challenges for South Asia in harnessing the 4IR
and discovering potential avenues for cooperation through a multi-
stakeholder dialogue on how the region can constructively shape its
future in the 4IR to improve the well-being of its people individually and
collectively.
“ The shift to digital technologies can
boost efficiency and production, whilst
enhancing the quality of life across
South Asia and the world.
INSIDE IPS
Q: In your view, what are the challenges and
opportunities for Sri Lanka in the 4IR?
JW: Disruption of technology through the 4IR can potentially support
the region’s economic prospects or hamper it. The 4IR ushers in a new
era in which digital smart technology is changing the way we live, work
and learn. The shift to digital technologies can boost efficiency and
production, whilst enhancing the quality of life across South Asia and the
world. The digital transformation may provide an opportunity for South
Asia to achieve faster growth through its emerging tech industries and
capitalize on its educated workforce and technologically connected youth
population to build technologically competitive and innovative industries,
generating more jobs and supporting faster growth. Furthermore, such
technologies can promote inclusive growth through the use of technology
across all sectors of the economy including agriculture and informal
sector, thereby benefiting farmers, women, etc.
However, inclusivity from technology is not guaranteed and depends on
technological uptake. There is a need to address some of the challenges
that the revolution brings about. Widening inequality owing to the
existence of uneven use of technology in South Asia’s typically less tech-
savvy rural and informal sectors, infrastructure and skill gaps, concerns
of how technology is affecting the planet, the need for resources in
upgrading existing administration systems in South Asia for digital
uptake and related intellectual property issues; are some of the potential
challenges that South Asia may need to address in capitalizing on the 4IR
to deliver broad-based growth to ensure that no one is left behind.
55

IPS – Monash Conference Highlights
New Research on Economic
Development in South Asia
The Conference on ‘Economic
Development in South Asia’, co-organised
by the Institute of Policy Studies of
Sri Lanka (IPS) and the Centre for
Development Economics and Sustainability
(CDES) and South Asia Research Network
(SARN) of the Monash University, Australia,
examined the development impact of
innovative policy initiatives for spurring
development in the region using latest
research methods such as randomised
field experiments, spatial distribution
of consumption, and multidimensional
poverty correlates and other micro
econometric analysis.
The conference focused in the areas of
poverty and inequality, entrepreneurship,
agriculture, environment sustainability,
labour and migration, education,
macroeconomic growth, and financial
markets.
Research on Traffic Congestion in Kandy
Bags Annual Saman Kelegama Memorial
Research Grant
IPS announced Kanishka Werawella, of the
University of Colombo, as the winner of the
Saman Kelegama Memorial Research Grant
2019.
From applications received in response to
IPS’ Call for Proposals, three shortlisted
candidates presented their research
proposals. Alongside the winning candidate,
whose proposed research aims to estimate
the cost of traffic congestion in the
Kandy city and factors affecting ‘green
commuting’, the other two shortlisted
candidates were Rushan Jayatunga from
the University of Moratuwa and Wathsarindu
Karunaratne from the International College
of Business and Technology (ICBT).
56
IPS NEWS
January – June 2019
Exports Lead to Higher Wages, More
Jobs, Especially for Women, Shows New
Report
The Sri Lankan experience shows
that exports have created more jobs,
increased wages, and shifted employment
from informal agriculture sector to
manufacturing and services. Mostly
women and youth have benefited from
these developments.
But, the nature and composition of
international trade is changing rapidly.
To continue to benefit from exports in a
changing trade environment Sri Lanka
will need to reform its domestic policies
to produce skilled workers, facilitate
investments, and improve easiness of
doing business, noted the IPS Director of
Research, Nisha Arunatilake.
IPS Executive Director Speaks on
Harnessing Trade Policy for Global
Integration
IPS Executive Director, Dushni Weerakoon,
presented a paper on ‘Infrastructure,
Financing and BRI: Challenges for
Emerging Economies’, discussing how
to enhance trade connectivity, in light of
key global economic trends, noting the
challenges in mega connectivity projects.
She was speaking at the Commonwealth
Consultation for the Asia-Pacific
Region on Harnessing Trade Policy for
Global Integration, co-organised by the
Commonwealth and the Institute of South
Asian Studies (ISAS) at the National
University of Singapore on 28 – 29 May
2019.
New Thinkers’ Symposium Highlights the
Role of Technology in Economic
Transformation
Currently, Sri Lanka is creating a digital
roadmap for the country, but the lack of
coordination, focus, and support among
ministries and other government agencies
is an issue that needs to be addressed,
noted Minister of Telecommunications,
Foreign Employment and Sports, Harin
Fernando.
Minister Fernando made these remarks
during a panel discussion at the New
Thinkers’ Symposium (NTS), organised by
IPS, on 21 March 2019 in Colombo. The
panel, moderated by IPS Research Officer,
Kithmina Hewage, comprised of Marine
Biologist, Asha de Vos, and the Head
of FemTech for MAS Holdings, Gayani
Abeyasinghe.
Regional Workshop on Economic
Globalization Statistics and Conference
on Mapping Value Chains
IPS Research Officer, Harini Weerasekera,
attended the Regional Workshop on
Economic Globalization Statistics and made
a presentation on ‘Border Tax Evasion in Sri
Lanka’ at the Conference on Mapping Value
Chains, held at Hotel Indonesia Kempinski,
Jakarta, Indonesia, on 13 – 15 June 2019.
The presentation was based on her
paper titled ‘Tax Rates and Tax Evasion:
An Empirical Investigation of Border Tax
Evasion in Sri Lanka’, which estimates the
extent of underreporting and mislabeling of
imports taking place at Sri Lanka’s border.
LATEST PUBLICATIONS
Working Beyond the Age Belt and Road Initiative, Debt
of Retirement: Patterns and and Diplomacy: Challenges
Determinants of Elderly Labour and Opportunities for China
Force Participation in – Sri Lanka Economics
Sri Lanka Relations

By Ganga Tilakaratna, By Dushni Weerakoon

Chinthani Sooriyamudali and and Janaka Wijayasiri
Anarkalee Perera
June 2019
May 2019

Sri Lanka’s NEETs: An Analysis Climate Insurance for

of Youth not in Education, Dry Zone Farmers in Sri
Employment or Training Lanka: Prospects for Index
Insurance
By Ashani Abayasekara and
Neluka Gunasekara By Kanchana
Wickramasinghe
March 2019
May 2019

UPCOMING PUBLICATIONS

Visit our YouTube Channel ‘IPS Sri Lanka’ for Interviews with the Authors.
For Details on IPS Publications Contact:
Amesh Thennakoon, Publication Officer, 011 214 3107 or 011 214 3100 | amesh@ips.lk or publications@ips.lk
57
 CONTRIBUTORS
58
Ashani Abayasekara
Ashani Abayasekara is a
Research Officer with research
interests in labour economics,
economics of education,
development economics, and
microeconometrics.
Dilani Hirimuthugodage
Dilani Hirimuthugodage is a
Research Officer working in the
Agriculture Economic Policy unit
at the IPS. Her research interests
include agriculture economics,
intellectual property rights, food
security and innovations in the
agriculture sector especially on
Genetically Modified Organisms
(GMOs).
Damithri Munasinghe
Damithri Munasinghe was a
Project Intern at IPS.
Chinthani Sooriyamudali
Chinthani Sooriyamudali is a
Research Officer with research
interests on poverty and
development policy, econometrics
and economic modelling,
macroeconomic policy and
planning, and international
economics and trade.
Kanchana Wickramasinghe
Kanchana Wickramasinghe is a
Research Economist at the IPS,
with a focus on environment and
natural resource management
policy research. Her research
areas include sustainable tourism,
disaster management, natural
resource management, green jobs
and climate change.
Nisha Arunatilake
Nisha Arunatilake is the Director of
Research at the IPS. She heads the
Labour, Employment and Human
Resource Development research
unit. Her research interests include
labour market analysis, education
and skill development, migration
and development and health
economics.
Chathurga Karunanayake
Chathurga Karunanayake is a
Research Assistant at IPS, with
research interests in regulatory
governance, poverty and
development policy, international
economics and trade, health
economics and policy, economics
of education, and environmental
economics.
Wimal Nanayakkara
Wimal Nanayakkara is a Senior
Visiting Fellow of the IPS with
research interests in poverty, and
is a specialist in sampling.
Dushni Weerakoon
Dushni Weerakoon is the Executive
Director of the IPS and Head of
Macroeconomic Policy research
at the Institute. Since joining
the IPS in 1994, her research
and publications have covered
areas related to regional trade
integration, macroeconomic policy
and international economics.
Janaka Wijayasiri
Janaka Wijayasiri is a Research
Fellow at IPS. He has over 12 years of
experience on trade policy issues and
heads the International Economic Policy
Unit. He is a member of the Talking
Economics Editorial team.
Thisali de Silva
Thisali de Silva was a Project
Intern at IPS. She was the
recipient of the Saman Kelegama
Memorial Research Grant 2018.
Sunimalee Madurawala
Sunimalee Madurawala is a
Research Economist at the
Health Economic Policy Unit. Her
research interests include health
economics, gender and population
studies.
Dinushka Paranavitana
Dinushka Paranavitana was a
Project Officer at IPS.
Bilesha Weeraratne
Bilesha Weeraratne is a Research
Fellow at IPS focusing on internal
and international migration and
urbanization. She is also interested
in labour economics, economic
development, and economics of
sports. She is a member of the
Talking Economics Editorial Team.
Charmaine Wijesinghea
Charmaine Wijesinghe is Manager –
Publications & Events at IPS and is
a member of the Talking Economics
Team.
Kithmina Hewage
Kithmina Hewage is a Research
Officer with research interests in
international political economy
including WTO issues, trade
and development, export
competitiveness, and Foreign
Direct Investment. Kithmina is
also a member of the Talking
Economics Team.
Shihara Maduwage
Shihara Maduwage is Manager
- Communications & Strategic
Outreach at the IPS and the Editor
of Talking Economics.
Nipuni Perera
Nipuni Perera is a Research Officer
at IPS. Her research interests
are infrastructure development,
international economics and trade,
poverty and development policy,
and regional integration.
Harini Weerasekera
Harini Weerasekera is a Research
Assistant at IPS, working in
the areas of macroeconomic
policy and planning, labour and
migration, and econometrics and
economic modeling.
59
 06 Sri Lanka needs to focus
on both technological 08
preparedness as
well as creating
a complementary
economic ecosystem.
The United Nations
22
20 celebrated the
International Women’s
Day, under the theme
‘think equal, build
smart, innovate for
change’, infrastructure.
34
28 The coordinated blasts
on Easter Sunday in Sri
Lanka claimed more
than 250 lives and left
at least another 400
injured. This is a new
brand of terrorism which
transcends geographical
borders. Here, migration
play a critical role.
The presence of a
46
42 large population of
youth not in education,
employment, or training
(NEETs) is a major
cause for concern for
Sri Lanka. Worryingly,
the country recorded a
NEET rate of 26.1% in
2016.
60
5G technology is a
massive breakthrough in 18
the telecommunication
industry and can herald
significant changes in Sri
Lanka.
As Sri Lanka, like
24
many other developing
countries, escalates
its engagement with
China’s ambitious Belt
and Road Initiative (BRI),
the question of debt
entrapment requires a
more rigorous review.
Tourism’s real
contribution to the 40
national economy is
important to guide
tourism policies.
However, this is not
yet clear as existing
assessments do not
take into account all the
aspects of economic
impacts of tourism.
Many Sri Lankans live 50
just above and very
close to the National
Poverty Line (NPL). As
such, it is important to
have a broad look at
poverty, when developing
strategies to alleviate
poverty.
Is Sri Lanka’s job
market ready to face
the challenges and
leverage the opportunities
presented by the Fourth
Industrial Revolution?
The immediate economic
consequences of Sri
Lanka’s Easter Sunday
terror attacks are obvious.
The damage to tourism
is the most apparent and
investments decisions
might be delayed.
The large number of
youth being employed
as three wheeler
drivers in Sri Lanka
has concerned
policymakers. The
government has tried to
intervene in the tuk-tuk
market by attempting
to impose an age
restriction on three-
wheeler operators.
IN A NUTSHELL
The solution to the rising
problem of land-based
marine plastic pollution in
Sri Lanka is a combined
force of banning single-
use plastics, proper
waste management, and
the use of sustainable
ecofriendly alternatives.
 FAST FACTS
In Sri Lanka, the IT industry can
potentially become a US$ 5
billion industry by 2022, creating
200,000 direct job opportunities,
and enabling the launch of up to
1,000 start-ups.
Bitcoin mining is
estimated to be associat-
ed with 22 megatons in
CO2 emissions per year,
which is approximately
equivalent to the carbon
footprint of Sri Lanka.
When other cryptocur-
rencies beyond bitcoin
are taken into the equa- 2019 marks a big milestone
tion, the figure doubles. as the earliest members of
“Generation Z” are now
coming of age and entering
the workforce.
Microsoft has invested
over US$ 11 million in
Sri Lanka, offering In June, the National Digital
technology skills Roadmap, focusing on Sri
training and connec- Lanka’s digital journey
tions to employment, towards Smart Sri Lanka
entrepreneurship, and was launched, under the
continued education. theme “Limitless You”. It
covers operational activities
of 16 fields including
Governance, Security,
Transportation, Mobility,
Health, Communication,
Education and many more.
In Feburary, Dialog
Axiata PLC, Lanka
Electricity Company
(LECO), and the
Ministry of Power and
Renewable Energy
deployed an Internet
of Things (IoT)
enabled smart-grid
solution to Prepaid
Electricity Metering in
Sri Lanka.
A study by the International Labour
Organisation (ILO) has found that
adoption of high levels of automation in
Sri Lanka’s logistics businesses could
lead to loss of some jobs.
Sri Lanka’s IT industry
is planning to priori-
tise data science and
artificial intelligence
to increase the export
of skilled workers and
improve its GDP.
According to Sri Lanka Association for
Software and Services Companies
(SLASSCOM), the potential economic
impact from data science and AI
exceeds more traditional information
and technology services and hardware.
AWS Educate, a unit of
Amazon Web Services
(AWS), will help train
50,0000 Sri Lankan
students in cloud comput-
ing and artificial intelli-
gence (AI) in the next two
years in collaboration
with Sri Lanka Associa-
tion of Software and
Service Companies
(SLASSCOM).
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